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Broker Roundup: Ferrexpo, Unilever, Persimmon, Dragon Oil, Rockhopper Exploration, Clontarf Energy, Victoria Oil & Gas, Faroe Petroleum, Nautical Petroleum, Telit Communications & More
The flow of positive broker notes in response to yesterday’s strong production report from Ferrexpo (LON:FXPO) continued today, with Deutsche Bank upping its earnings forecasts for the company.
London’s only listed pure iron ore producer revealed on Wednesday that its pellet production from its own ore rose 6.9 percent to 2.27 million tonnes (Mt) in the second quarter this year. Total pellet output climbed 7.8 percent during the quarter as production from purchased materials jumped 18 percent.
These figures were ahead of Deutsche Bank's forecasts. As a result, Rob Clifford of Deutsche Bank slightly raised his earnings forecasts for the Ukrainian iron ore producer by 0.2 percent and 0.1 percent for 2011 and 2012 respectively.
Likewise, Renaissance Capital welcomed the production report from Ferrexpo, pointing out the increased share of higher iron-content pellets in its total output. Renaissance Capital analysts expect to see “fairly strong” interim results from Ferrexpo in August, owing to the recent increase in iron ore prices.
Goldman Sachs reckons Unilever's (LON:ULVR) growth is set to accelerate through 2011. In a note, the investment giant looked at the food sector in Europe and, as well as Unilver, looked at Danone and Nestle.
All three are due to report Q2 results shortly. In valuation terms, Goldman sees most upside potential in Unilever, and expects the valuation gap against Nestlé to close over time as management delivers on sustained higher growth and improved margins.
Earnings estimates for Persimmon (LON:PSN) have been upgraded by J P Morgan after the house builder’s upbeat trading statement on Tuesday increased expectations over operating margin.
The bank has increased its pre-tax profit estimate for 2011 by three percent to £138 million, which is six percent ahead of consensus forecasts. Consequently, J P Morgan has also increased its price target to 518 pence. That said, the bank reckons there is greater value elsewhere in the sector and as such it retained a ‘neutral’ stance on the house builder.
Analyst Caren Crowley, from broker Davy, expects Dragon Oil (LON:DGO) to release a good operational update later this month. She thinks when it releases a trading statement on July 21 for the six months to 30 June, the firm will be "comfortably on track" to reach or exceed its own guided target of up to 20 percent production growth in 2011.
The analyst believes this morning's well result from the Cheleken contract area offshore Turkmenistan is an incremental positive for the stock.
Rockhopper Exploration (LON:RKH) appears intent on de-risking Sea Lion as quickly as possible, according to analysts at Westhouse Securities. Importantly the Westhouse analysts reckon this new rig slot could give Rockhopper a chance to drill an exploration well to follow up the recently completed 3D seismic programme.
The broker repeated a ‘buy’ recommendation, which targets 494p, this morning after the Falklands oil explorer announced that it is adding another well to the current drill programme.
Optiva Securities this morning initiated coverage of the junior oil explorer Clontarf Energy (LON:CLON) with a strong buy. The City research firm says any one of its projects has the capacity to utterly transform the company if they meet with a modicum of drilling success.
The group is also a “closeology play”, according to analyst Jason Robertson, who points to the Tano 2 exploration acreage in the newly emerging oil district of Ghana, which lies very near to major oil discoveries made by Tullow.
Victoria Oil & Gas (LON:VOG) cheered analysts today with a promising update on its exploration and development work across its West Medvezhye block in Siberia. Indeed some analysts believe the shares are significantly undervalued. Shahin Amini, analyst at broker FoxDavies.
He said it is “encouraging” to note that although VOG’s focus has been on the development of the Logbaba gas field in Cameroon, the company has made good progress with the data processing and technical work for the West Med asset.
Amini believes that with one discovery (Well-103) already in the bag, and six exploration prospects at West Med brewing, a portfolio of opportunities is developing for the company, with the proximity of already producing fields and export an added bonus for prospects.
He added: “From today’s announcement it is clear that the company has identified the main issues for the commercial exploitation and is managing these accordingly.
Westhouse is pleased Faroe Petroleum’s (LON:FPM) announced spudding of the Fulla well, which follows the high-profile disappointment of the Lagavulin well.
The broker highlights that the Lagavulin well was testing a different and far more risky part of the West of Shetlands basin, and came in over budget and was subject to significant operational delays. The Fulla well, by contrast, is in shallower water and is being drilled in the West of Shetlands summer weather window.
“We therefore do not anticipate the operational delays experienced with the Lagavulin well,” says the broker. Westhouse retains its ‘buy’ recommendation on the company due to its high exploration upside and strong financial position.
Similarly Evolution Securities also welcomed the news, saying success with the Fulla well would help “substantially” de-risk the commercialisation questions surrounding the Freya discovery as the two could be co-developed on a standalone basis rather than require tie-in to BP’s Clair field. Evolution has an ‘add’ stance on Faroe shares, with a price target of 210p.
Meanwhile looking at Nautical Petroleum (LON:NPE), Evo said the firm could push its Kraken heavy oil project forward and submit a preliminary field development plan by September if a new well is successful. The North Sea oil firm spudded the 9/02b-5 appraisal well yesterday.
“The market has taken a sceptical view on Kraken, we believe because it is ‘heavy oil’ and as yet, there has been no flow test conducted,” said Evo analyst Keith Morris. “Hence, provided the well flows at a commercial rates, we would expect a very positive response in the share price.”
Northland Capital Partners upheld its bullish forecasts for Telit Communications (LON:TCM) today, retaining the view that the company will outperform the growing telecom market in the next two years.
Even though the share price has risen sharply over the past six months, rising from 70 pence at the start of the year to the current 91 pence, Northland sees Telit as a good buying opportunity. The AIM quoted Telit designs and manufactures machine to machine (M2M) modules that allow devices to talk to each other in an ‘internet-of-things’.
Merchant Securities believes that the commercialisation of AFC Energy’s (LON:AFC) ‘Beta’ fuel cell should see the groups regain ‘top spot’ in clean-tech investors’ minds as they look for exposure to fuel cell related investments.
