- RBC upgrades its outlook on the UK banking sector.
- Jefferies starts coverage of Ithaca Energy with ‘buy’ rating
- UBS downgrades Sage Group to ‘sell’
- Citigroup cuts LondonMetric Property to ‘neutral’
- Jefferies raises Centrica target price
RBC upgrades its outlook on the UK banking sector
RBC picked out NatWest LON:NWG as the stock with most upside potential, raising its target price 27.6% to 370p (290p), with a ‘sector perform’ rating to reflect the outlook of increased interest rates, which will help boost the bank’s revenues and strengthen its balance sheet.
Other UK banks to have their target prices raised were Metro LON:MTRO (up 20% to 120p), Lloyds LON:LLOY (up 19.3% to 68p), Virgin Money UK LON:VMUK (up 13% to 215p), Barclays LON:BARC (up 11% to 200p) and HSBC LON:HSBA (up 0.07% to 725p).
At close of trading on 22 December, the stock was priced at 264.6p, a return of 8.9% YTD and 10.2% over 12 months.
Jefferies starts coverage of Ithaca Energy with ‘buy’ rating
Jefferies started coverage of Ithaca Energy [LON:ITH] on 20 December with a ‘buy’ rating and a target price of 245p, which reflects potential growth of 38%.
The company was admitted to trading on the London Stock Exchange on 14 November.
The broker believes the company has the highest reserves life among North Sea peers, estimating Ithaca’s pro forma 2P reserves at 16.3 years, while Aker has 14.9 years and Harbour Energy LON:HBR 8.5 years.
Although the recent windfall tax imposed by the government had affected all UK producers, Jefferies believes Ithaca to have a “consistent, coherent strategy focused on growth and returns”, making it a “compelling proposition”.
At close of trading on 22 December, the stock was priced at 191.1p.
UBS downgrades Sage Group to ‘sell’
UBS on 20 December downgraded accountancy software firm Sage Group LON:SGE to ‘sell’ (neutral), lowering its target price to 720p (745p).
The bank’s analysts believe that “ongoing margin pressures were masked last year by bad debt provision reversals and the benefit of a major restructuring round”, while the recent acquisitions of Brightpearl and Lockstep would result in losses and a reduced rate of return growth for next year.
Nevertheless, Sage intends increasing its dividends by 4% in February 2023 and earnings per share next year are expected to be up more than 40%.
At close of trading on 22 December, the stock was priced at 747.4p, a return of -12.3% YTD and -8.3% over 12 months.
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Citigroup cuts LondonMetric Property to ‘neutral’
Citigroup cut LondonMetric Property LON:LMP to ‘neutral’ (buy) and almost halved the target price to 166p (299p).
The real estate trust saw a 14% increase in rental income in the six months to end September, but on 23 November last year LMP reported increased losses due to rising interest rates, which affect the valuation of the trust’s assets.
The expected future trajectory of debt costs has resulted in a material re-pricing, both in the direct property market and in the equity markets, according to CEO Andrew Jones.
At close of trading on 22 December, the stock was priced at 171p, a return of -39% YTD and -37% over 12 months.
Jefferies raises Centrica target price
Jefferies on 22 December raised its Centrica LON:CNA target price by almost a third to 130p (100p) and reiterated its ‘buy’ recommendation.
In November, the company said that its numbers would outperform analysts’ overly cautious estimates, suggesting that its earnings per share would be closer to 26p per share than the 15.1p forecast by some of the more pessimistic analysts.
Since end October, the company’s shares have surged some 45%.
Centrica, which owns British Gas, owns the recently reopened Rough Storage Facility, which has boosted the UK’s gas storage capacity by up to 50%, at a time of record-high gas and electricity prices.
At close of trading on 22 December, the stock was priced at 95.2p, a return of 33.9% YTD and 39.7% over 12 months.
