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Broker Spotlight brings some of the more intriguing and topical analyst coverage to centre-stage. The daily column aims to illuminate thoughts and opinions behind the big stories. London is one of the financial capitals of world. The influential and closely followed views of its analysts regularly move markets and split opinion. The Broker Spotlight column arms Proactive readers with the added insight from the often colourful thoughts and headline-grabbing valuations from the City’s analyst community.
Broker Round-up, including Ophir Energy, Petra Diamonds, Anglo American, Morgan Crucible, Meggitt, Ashmore Group
January 18 2013, 10:50am
This year could be a “company-maker” for African oil explorer Ophir Energy (LON:OPHR).
That’s what Japanese investment bank Nomura reckons, asking whether 2013 could be the year of Ophir’s first material oil discovery.
Analyst Tom Robinson lifts the stock from ‘reduce’ to ‘buy’, bypassing a neutral stance completely in a drastic change of opinion.
“Our investment strategy for E&Ps is to either seek ‘value’ based on production or back names that offer ‘company-changing’ upside potential through the drill bit,” said Robinson.
“Our upgrade of Ophir reflects the latter.”
Though a number of brokers have suggested Ophir is geared to exploration, Robinson says the rest of the City is missing the value from exploration in pre-salt Gabon, as well as the scope for fully-processed seismic in the first quarter to de-risk key wells in Tanzania and Gabon.
His blue sky scenario points to US$17bn being generated from drilling in 2013.
Shares jumped 3.3% on the bullish outlook.
The same broker tried its hardest to inject yet more life into a quiet – and snowy – day of trading in London.
Its overview of diamond stocks created a sparkling image of the sector.
Analyst Tyler Broda predicts that rough diamond prices will not drift far from current levels this year and suggests investors look at longer-term investment ideas.
“We expect demand to outstrip supply from 2015,” said the analyst.
“This should lead to enhanced margins for the already robust producers and likely start a new diamond exploration cycle.
“With secular Asian middle class expansion driving demand growth, we see many characteristics supportive of a long-term bull market.”
Those willing to put their faith in diamonds should invest through Anglo American (LON:AAL), which owns De Beers, or its pure-plays, including Petra Diamonds (LON:PDL), a “financed, long-term growth story”, according to Broda.
He urges investors to avoid Gem Diamonds (LON:GEMD) however, kicking off coverage with a ‘reduce’ rating.
Goldman Sachs is eyeing up FTSE 250 ceramics products maker Morgan Crucible (LON:MGCR).
An upgrade to ‘buy’ from the heavyweight broker sent shares up 2.6% as it sees “a compelling entry point to an undervalued stock with significant exposure to an Asia recovery”.
Barclays Capital notes that Meggitt (LON:MGGT) has slipped off the radar of most investors – but not for much longer.
It upgrades the aerospace engineer to ‘overweight’, a move that has lifted the shares by 1.8%.
Analyst Christian Laughlin thinks the stock is trading at a 20% discount to its rivals, adding that this gap will close once aerospace investors look away from the more expensive pure-play names and turn their attention to laggards like Meggitt.
Ashmore Group (LON:ASHM) meanwhile lost 2.8% on the back of UBS’s upgrade to ‘neutral’.
While the broker believes the shares are close to their peak, it also reckons competitive pressures will persist for the emerging market investment manager.
