London broker comment corner; Aveva Group, IMI Plc and Anglo American get rated
Proactive Investors brings you the buzz from the brokers, with a wrap of overnight comment from some of the biggest names in the London square mile.
From London: Engineering software provider to the plant and marine industry Aveva Group (LON:AVV) was downgraded to 'sell' today from 'neutral' on valuation grounds by UBS.
However, the Swiss bank upped its price target for the stock to 1550 pence, from 1400 pence previously.
There are many positives and Aveva has an inherently cash generative business model, with two thirds of revenues coming from recurring sources, said analyst Michael Briest.
But he said the group's valuation looked high with the business fundamentals already adequately discounted.
"However, we move to a 'sell' rating with a view that 2012 is unlikely to provide enough upside surprises to sustain momentum," he said in a note to clients.
Meanwhile, Wall Street bank Citi focused on another engineering group in a note today - IMI Plc (LON:IMI) - which it said remained a "top pick".
"We see recent EPS-accretive acquisitions as positive and expect the full year report on 2 March to be supportive," said analyst Mark Fielding
"The market has been concerned, in our view, about the cyclical risk to IMI’s earnings, especially as it has achieved new peak margins in recent years. However, we see near- and medium-term risk upside potential. Recent news flow on key end markets such as trucks, oil & gas and nuclear has been more positive," the analyst also pointed out.
Citi targets a price of 1200 pence for the stock (current price: 977 pence).
In mining, Citi has reduced the giant Anglo American's (LON:AAL) earnings forecasts up to 3 per cent following full year 2011 results, as the investment bank said it was increasing copper and metallurgical coal unit costs.
"FY11 unit cost inflation in these two divisions was 39% and 33%, respectively, ahead of our forecasts, said analyst Heath Jansen, who rates the stock as 'neutral' with a target price of £30.
Jansen said Citi forecasted a 4 per cent decline in full year 2012 EPS to $4.66
"Our forecast of 8 per cent copper equivalent volume growth is not enough to offset lower commodity prices and rising cost forecasts," said the analyst.
Elsewhere, Merchant Securities has a 'buy' rating on Music Festivals (LON:MFP) and has raised its 2012 forecasts for revenues by 14 per cent from £14.4 million to £16.4 million, but reduced its pre-tax profit and EPS (earnings per share) by 12 per cent to £1.4m and 7.3p respectively.
It comes after the festival group, which already wholly owns three summer events, has a new one coming this year in the shape of "Costa de Fuego".
Analyst Amisha Chohan at Merchant, which has a target price of 71 pence for the stock, said the new festival diversified the risk of any individual event.
"Guns N’Roses and Marilyn Manson should help underpin sales ahead of the event and enable it to build a solid and reputable festival brand.
"The addition of a new festival does not traditionally reap earnings rewards in the first year, but should drive medium term upgrades from increased capacity and stronger presence. We adjust our forecast for the new festival," said the analyst.
Shaft Sinkers (LON:SHFT) told investors today that revenues grew by around 20 per cent in 2011 to £220 million and said the order book at the year-end stood at £296 million, while the company has over £1 billion-worth of outstanding tenders.
Kevin Fogarty, at broker Westhouse, said confirmation the company had traded ahead of expectations in 2011 gave support for a re-rating of the shares, adding that relative to its international peer group, the stock looked "extremely undervalued".
The broker reiterated its "strong buy" recommendation and 170 pence price target.
Elsewhere, City broker Daniel Stewart said there was latent value in Victoria Oil & Gas’s (LON:VOG) producing assets in Cameroon.
In a note to clients, analyst Kate Fisher highlighted the fact that VOG shares are yet to see a re-rating despite the start of commercial gas production at the Logbaba gas project last year.
Daniel Stewart has a ‘buy’ recommendation on the stock with an 8.7p price target. This punchy assessment implies the stock could rise some 130 per cent from the current price of 8.7p.
Meanwhile, improved revenue visibility has lead City broker Daniel Stewart to upgrade its view on specialist pharmaceutical company Plethora Solutions (LON:PLE).
Analyst Vadim Alexandre says January’s strong trading statement reflects the fact that Plethora’s lead product lines are now coming on stream.
The drug company, which specialises the treatment and management of urological disorders, increased revenues substantially in the fourth quarter at £120,000.
Daniel Stewart has a ‘buy’ recommendation and a 7.3 pence target price for the stock, which implies the shares could rise some 77 per cent from the current price of 4.12 pence.
