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Broker Round-up part 2, including Iofina, Orosur Mining, Galileo Resources, dotDigital, Condor Gold, Stanley Gibbons, Vane Minerals, Goldplat, Sefton Resources

Published: 01:35 12 Jan 2013 AEDT

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Broker Investec lifted its price target for Iofina (LON:IOF) following the commissioning of its second Iodine extraction plant.

The new target price of 117p (up from 70p) reflects the de-risking of the rollout and an assumption of $2.86mln of operating cash flow per unit after tax (previously $1.75mln).

The broker also increased its 2013 net income estimate for Iofina from £4.1m to £5m and to £11.6m from £10.2m in 2014.

Iofina today said that following construction, testing and final hook up, the plant, which is located in Oklahoma and based on Iofina's WET IOsorb technology, had been fully commissioned.

Iofina’s technology extracts iodine from the waste brine created by oil and gas companies. Its plan is to roll out a number of plants across major US oil fields in Texas, California and Oklahoma.

Investec expects a roll out of around 4 units per annum going forward, though it says execution risks remain significant.

City broker Seymour Pierce is keeping its positive stance on Orosur Mining (LON:OMI) despite the share losing more than 10% today.

It comes as the miner said it expects to hit its production target this year despite returning lower than expected grades in its attest quarter.

Analyst Asa Bridle however said he will need to adjust his forecasts and target price, which is currently 85p.

“We take comfort from the overall performance of the company’s operations in the first half and the board’s guidance that the second half will see the situation continue to stabilise and improve as outlined in October 2012,” he said.

Broker Shore Capital liked the look of Galileo Resources (LON:GLR) after it put the finishing touches to the legal due diligence on its acquisition of the Nkombwa Hill rare earths project in Zambia.

It described the news as positive, and declared there is “significant potential upside” to the current valuation.

“Simply applying the peer average Enterprise Value/tonnes (t) of total rate earth oxides of US$501/t at the time of the Glenover resource announcement to Galileo’s attributable resource of 267,000 t TREO+Y2O3 [Yttrium Oxide) implied a potential fully diluted share price of 71p/share,” Shore noted.

Charles Stanley called dotDigital (LON:DOTD) a high margin, cash generative business that continues to deliver strong growth.

It kept its ‘buy’ recommendation and 16p target price on the stock after a strong performance in the second half of 2012.

The group’s biggest division, the email marketing software-as-a-service (SaaS) unit, saw revenue surge 38% to £5.7mln in the six months to the end of December from £4.1mln the year before.

That was a bigger increase than management had expected, and contributed to a 22% improvement in group revenue to £6.7mln from £5.5mln in the second half of 2011.

The broker applauded the decision of management to review the strategic options for this division in light of the greater international growth opportunities for dotMailer and the resources required.

“The Search and Agency services sector are seeing a number of changing dynamics. The new Google (NASDAQ:GOOG) algorithm changes; the cost to cross-sell to dotDigital SME clients and service them at decent margins is becoming less attractive and importantly non-core,” Charles Stanley reports.

“These services were always seen as a bolt-on or added value to the core dotMailer client base,” the broker added.

Other small caps given a rousing reception from brokers were Condor Gold (LON:CNR) after it revealed more encouraging drill results, collectibles trader Stanley Gibbons (LON:SGI) and African gold producer Goldplat (LON:GDP) after updates on their businesses. Vane Minerals (LON:VANE) and Sefton Resources (LON:SER) were also in brokers’ good books.

It’s about time to start thinking about booking that much needed summer break again.

With that in mind, broker UBS checked in with the airline sector and cast its eye over possible investment opportunities.

Analyst Jarrod Castle notes that 2012 was a good year to be an airline investor. But what about 2013?

He reckons long haul capacity will increase by 1.6% in the first quarter of 2013, while airlines will put around the same number of bottoms on seats on their short haul flights as last year.

British Airways and Iberia owner IAG’s (LON:IAG) shares price may have lagged behind the pack last year, but it was reaping the rewards of an upgrade from UBS today.

Castle now tips the stock a ‘buy’, having previously taken a ‘neutral’ stance.

“We think that IAG could be the laggard most likely to outperform in 2013 should it achieve the concessions the company wants from Iberia staff,” said the analyst, who also raised his target price to 250p.

While Spanish carrier Iberia was in a spot of bother last year, Castle believes some of the restructuring risk has now dissipated, adding that though still challenging, “we are becoming more confident on positive talk results”.

Add this on to a possible European airline industry recovery and you’ve got yourself a very handy holding, Castle reckons.

The tipster was not so upbeat about easyJet (LON:EZY), whose shares led the way in 2012.

In his opinion, the shares will not climb enough to merit a ‘buy’ rating and he cuts the stock to ‘neutral’.

He still expects the share price to rise a bit in 2013, a prediction that lifts his target to 890p from 780p.

With the last of the mince pies polished off and the festive food retail reporting done and dusted, brokers took a look at the sector.

Bank of America Merrill Lynch analysts like Morrisons (LON:MRW) despite the chain posting possibly the worst set of numbers out of all the listed supermarkets.

The heavyweight broker has a ‘neutral’ rating on Britain’s biggest retailer Tesco (LON:TSCO) and an ‘underperform’ recommendation on Sainsbury’s (LON:SBRY).

Oriel Securities jumped on the bandwagon as it talked up Tesco’s (LON:TSCO) results with an upgrade to ‘buy’.

As for other retailers, JD Sports (LON:JD) climbed 2.2% despite Oriel’s downgrade to ‘reduce’ on the back of its festive figures.

HSBC joined in, dropping clothing and food retailer Marks & Spencer (LON:MKS) to ‘neutral’ after its disappointing Christmas sales that missed forecasts.

Brokers cannot seem to get enough of the exploration and production sector.

Over the past week, City analysts have been picking their ones to watch and today the trend continued.

Deutsche likes the look of Africa Oil (LON:AOC), Cairn (LON:CNE), Premier (LON:PMO) and Salamander (LON:SMDR), while Exane BNP Paribas fancies the transformational exploration potential of Tullow (LON:TLW), Africa Oil (LON:AOC) and Afren (LON:AFR).

 

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