Broker tips: Standard Chartered, Petra Diamonds, Greggs
Analysts at Jefferies reiterated their 'underperform' rating on Standard Chartered on Tuesday as it sounded a cautious note on the group's shares.
Jefferies pointed to the declining trend in consensus estimates for the lender and the multiple hurdles that it was facing in terms of growing its revenues, which they said may necessitate a downgrade of management's expectations.
The consensus forecast for the rate of growth in the lender's revenues for 2019-2021 was roughly 5.0%, which was already at the lower end of management's expectations.
Nonetheless, among the risks that StanChart was facing were slower loan growth in Hong Kong and Singapore, a scant tailwind from rising interest rates and its net interest margins may have peaked in the third quarter at 1.6%.
"Thus, consensus estimates look challenging and management's medium-term aspirations may need to be downgraded to reflect such considerations. We see risk for further downgrades: our underlying pre-tax earnings forecasts for '19-21E are c15% below the Street," Jefferies added.
According to the investment bank, StanChart also needed to provide a convincing glide path as to how it was expecting to deliver returns greater than 10% within a reasonable time-frame.
"On newly established '21E forecasts, our models contemplate a ROTE of 5.6% on a CET1 ratio of 14.1%."
Analysts at Berenberg dropped their price target on miner Petra Diamonds on Tuesday, stating that while the group's operations appeared to be performing "fairly well", debt was still an issue.
Berenberg noted that after a period of extended capital expenditure, the diamond miner's major capital projects were now broadly online and delivering tonnage as expected
However, analysts said average realised prices at Petra's Cullinan mine, being a key value driver for the group, were underperforming and believes the miner was yet to see any clear signs of a turnaround.
"Therefore, while the operations themselves are performing fairly well, what cash flow Petra generates is predominantly consumed by its debt commitments, whether this be in the form of servicing its $650m bond or its BEE debt," said Berenberg.
"We find that on a NAV basis, while the company's assets have significant value ($800m-plus), the amount of debt currently on the structure consumes much of this value and results in a fair value of basically where the share price is today."
While dropping its price target on Petra from 37p to 30p, Berenberg reiterated its 'hold' rating on the group.
Analysts at Shore Capital reiterated their 'hold' stance on Greggs on Tuesday, stating that the company continued to "materially outperform" their expectations.
"Stunning" like-for-like growth of 9.6% in company-managed shops led the analysts to admit underestimating Greggs.
Consequently, they upgraded their below-consensus full-year 2019 CPTP forecast by approximately 10% to £102m, earnings per share of 79.0p.
Dividend per share was now seen rising by 16% to 41.6p in 2019, before climbing by a further 7% to 44.4p in 2020.
The broker's analysts commented that the boost to the baker's already strong trading followed high levels of media interest and "extensive publicity" surrounding the launch of the group’s ‘vegan friendly’ sausage roll at the start of the financial year, despite the derision directed at the pastry by one Piers Morgan.
"Customer transactions have increased and with the volume growth evident across the savoury category the strong trading has also, we believe, generated considerable operational gearing benefits across both the store base and manufacturing infrastructure," they said in a research note sent to clients.
Whilst Greggs has stated that trading "eased slightly" through February, which analysts estimate to mean a drop from approximately 11% growth in January to roughly 8% growth, trading is still on course to be ahead of market expectations, ShoreCap said.