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Broker Roundup: Citi says it may be time for investors to take a chance

Last updated: 13:30 04 Oct 2013 BST, First published: 12:30 04 Oct 2013 BST

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It may be time for investors to take more chances, according to Citi.

Apparently feeling somewhat inspired by National Poetry Day (yesterday) the investment banking heavyweight published a entitled ‘If’ put forward a bullish, albeit caveat laced, recommendation for investors to add more risk.

Whether or not they’re simply losing their heads remains to be seen, but nevertheless they seem to make a compelling case.

Citi says it is time to add be less cautious, IF macroeconomic risk is reducing, IF the macroeconomic opportunity is improving, and IF this improved macroeconomic environment equates to better profits, this in turn translates into greater investment appetite across the market.

“Equity investors have got to think about risk and leverage. How much risk should you have in your portfolio? We think the answer is more.”

Sticking to individual stocks, UBS is raising its forecasts for retailer Dixons (LON:DXNS) to reflect the shedding of its loss-making Pixmania division and its Turkish operations.

The electronic gizmos and warranties seller has been upgraded from 'hold' to 'buy' with the price target going up to 60p from 45p, after the retailer exited Pixmania and Turkey more swiftly than UBS had expected.

The Swiss bank said the speedy exits gave hope that a similarly fast getaway from Italy can also be achieved.

“From a strategic standpoint there is still scope for Dixons to refinance its debt at a normalised interest rate and for the UK property losses to fade. The remaining core business are set to benefit from a more positive macro backdrop especially in the UK as consumer credit picks up and housing transactions increase further benefiting the big ticket electricals market,” UBS argues.

City analysts applauded Barclays (LON:BARC) for the second time this week - as Investec upped its rating to 'buy' from 'add'.

Ian Gordon says its shares have been resilient since the July 30 announcement of the right issue, which has seen take-up of 95% and the stock has marginally outperformed Footsie since the middle of the year.

It comes after Wednesday (Oct 2) this week, heavyweight French broker SocGen lifted its rating on the bank's shares to 'buy' from 'hold' and gave a 12 month target of 320 pence.

“There's always next year” is the consoling message from JP Morgan Cazenove to shareholders in coloured gems producer Gemfields (LON:GEM).

The Gemfields share price took a knock when the company issued full-year results that were massively distorted by the delays to proposed auctions, thanks to a change in policy by the Zambian authorities.

That meant the company only had two auctions, versus four the year before. Cazenove expects there to be three auctions this year, which should lead to a much improved result, prompting a lifting of the target price from 23p to 24p.

Carpetright’s (LON:CPR) profits warning and departure of chief executive Darren Shapland was a total surprise, according to broker N+1 Singer.

The carpet, flooring and bedding retailer said full year profits would be significantly below expectation as like-for-like sales fell by 1.7% in the ten weeks to 29 September.

Darren Shapland, who had been CEO for seventeen months, is being replaced by Lord Harris, Carpetright’s veteran chairman who will become a full-time executive again. Graham Harris, the retailer’s trading director, is stepping up to be chief operating officer to work alongside Lord Harris.

N+1 said while there is a chance trading patterns could yet improve, helped by macro and self-help, it expects profits forecasts for the retailer will come back to £10m (10-11p EPS) or less. 

This would assume a second half LFL improvement of just 2% (rather than 4%).

The departure of CEO Shapland just 17 months into an expected five-year stint was another shock, said N+1, which had been a buyer but now has its target price and recommendation under review.

Investec says Wentworth Resources is ‘on the cusp of cashflow’ with the possibility of a gas sales deal coming soon and the ongoing construction of a pipeline connecting to Tanzanian capital Dar es Salaam.

It also highlights that the group’s assets have ‘the right postcode’ and fresh exploration programmes are set to get underway next year. “Wentworth is expecting to spud up to four exploration wells before end-2014 allowing it to test its material prospectivity in the prolific East Africa Rovuma Basin,” analyst Brian Gallagher said in a note.

Investec rates Wentworth as a ‘buy’ with a 125p price target – which is almost three times the current price of 44p.

Magnolia Petroleum (LON:MAGP) is becoming increasingly self-reliant because of the growing traction in its business, according to Northland Capital.

Northland, which rates Magnolia a ‘buy’, says this will see the company grow into a significant oil producer.

“Recycling of capital into the extensive drilling inventory combined with the gradual increase in net interest per well should continue to drive up the value of reserves and ultimately allow the self-sustainability of the business model as the company progresses towards becoming a significant producer,” analyst Andrew McGeary said in a note.

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