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Broker Round-up II: Beaufort boosts Nostra Terra target price

Beaufort Securities took a shine to Nostra Terra Oil & Gas (LON:NTOG) today on the back of the company’s placing to raise £750,000.

The US-focused explorer issued a total of 187.5mln new shares at a price of 0.4p, a 10% discount to the prevailing price, but 11% higher than the group’s last issue.

Beaufort raised its target price to 1.25p today and stuck to its ‘speculative buy’ recommendation on the shares.

“With management aligned with shareholders (as the largest block of shareholders), maintaining low overheads, the company has moved into breakeven at the operational level,” said analyst Harry Stevenson.

“The company expect a significant increase in revenue anticipated in 2013, having increased its working interest in High Plains Prospect to 20%, and concluded its legal action against Richfield.

“The company is building an inventory of diverse prospects, both operating and non‐operating and transitioning to more operated prospects where they will enjoy more control of the costs and time scale.”

Richland Resources’ (LON:RLD) update was a mix of good and bad news, according to RFC Ambrian.

The mining broker hailed the Tanzanian government tie-up that saw it granted a licence to mine tanzanite. But the illegal activities it hopes the alliance will prevent has taken its toll on the miner as it warned about the impact on its finances.

“While the deal with the government should be a huge benefit to its profitability going forward, it has come too late to avoid re-financing,” analyst Craig Foggo told clients.

He has put his target price and recommendation under review until the financing situation becomes clearer.

Shanta Gold (LON:SHG) has moved further to protect future revenues from a volatile gold price with more forward sales of gold from its New Luika mine in Tanzania.

Contracts have been agreed for an additional 9,000 ounces of gold to be delivered up to March 2014 at an average price of US$1,362 per ounce.

Investec added that while the ounces sold forward are modest relative to planned production, they represent the start of companies trying to establish some control over their forward cash generation.

In light of the significant gold price volatility, SHG’s forwards are currently around $100/oz above the spot price, the broker noted.

Elsewhere, Panmure Gordon stuck to its ‘buy’ rating and 114p target price on East African explorer Wentworth Resources (LON:WRL). It comes after the company sealed a US$10mln debt deal with energy trading group Vitol.

Britons may buy more food from Tesco (LON:TSCO) than any other supermarket, but the same cannot be said about buying the shares.

Shares in Britain’s biggest supermarket chain have fallen more than 10% in the past three months after it failed to clear the horsemeat hurdle.

Traces of DNA were found in some of its readymade meals, while main rival Sainsbury’s (LON:SBRY) emerged unscathed from the scandal. The going has been good to firm for its shares by comparison.

Japanese broker Nomura reckons Tesco’s share price decline offers investors a chance to buy the stock on the cheap.

In fact, it is Nomura’s only buy-rated UK supermarket, with Sainsbury’s and Morrisons (LON:MRW) only meriting ‘neutral’ ratings.

“The issue of horsemeat has been a relative headwind for Tesco in the UK, yet the group has still posted relative volume gains in grocery on a one-year and two-year basis, offering an opportunity for those undeterred by quarterly volatility,” said analyst Fraser Ramzan.

“Moreover, we regard the sales weakness from re-engineering a margin-dilutive non-food offer as a distraction.”

Things appear to be picking up in the supermarket sector despite the media storm that surrounded the horsemeat brouhaha, the broker added.

For those not hungry for shares in the supermarket, opportunity knocks in the banking sector.

That’s the view of Deutsche Bank, which suggests buying into Barclays (LON:BARC) and Lloyds (LON:LLOY) after the banking watchdog’s review of their capital inadequacies.

The Prudential Regulation Authority (PRA) said Lloyds must plug a capital shortfall of £8.6bn, RBS (LON:RBS) £13.6bn, and Barclays £3bn.

The broker urged its clients to pick up Barclays shares now, as well as Lloyds given the positive update on its capital position.

“Though there is temporary uncertainty around Barclays’ capital position we think the valuation justifies a Buy,” said Deutsche.

“On balance, we don’t expect the company to raise equity though we wouldn’t blame management if they did, given demand for other raises.”

RBS is a ‘sell’ in Deutsche’s opinion, while Asia-based HSBC (LON:HSBA) and Standard Chartered (LON:STAN) earn ‘hold’ ratings as they were confirmed as being adequately capitalised in the tests.

Standard though is Citigroup’s top banking pick as it ran through the best buys in every sector.

The broker says that, along with HSBC, which also merits a ‘buy’, Standard shares have underperformed, making it a good time to buy into the story.

Among the other tips are catering group Compass (LON:CPG), which yesterday unveiled the appointment of Diageo CEO Paul Walsh as its new chairman.

Walsh is leaving the Johnnie Walker and Smirnoff maker to chair what Citi calls a “world champion stock”.

It added: “Given the fragmented market, there is room for market share gains and improving margins. Further cash returns provide another support to the Buy case.”

Free-to-air broadcaster ITV (LON:ITV) tops Citi’s media table, while Reckitt Benckiser (LON:RB.), the company behind Cillit Bang, heads the list of consumer goods companies.

Rio Tinto (LON:RIO) is the best of the miners, according to Citi, which also likes mobile giant Vodafone (LON:VOD) after the recent share price decline.

Check in to shares in Ryanair (LON:RYA) is the message from Oriel Securities. The budget airline’s investor day unveiled a revised capacity growth plan and commitments for further returns of capital, which reinforces the strong investment case for the shares in Oriel’s view.

 

 


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