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Broker spotlight: AB Foods, AstraZeneca, TSB, Barratt, Armadale Capital...

Last updated: 13:05 13 Oct 2014 BST, First published: 12:05 13 Oct 2014 BST

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AB Foods (LON:ABF) has seen its share price drop by about 25% since early July, but that is enough according to Societe Generale, which has upgraded to ‘buy’.

Some concerns over like-for-like growth at powerhouse Primark, the clothing sector generally and weakness in sugar prices have been the reason for the share price dip.

SocGen, though, believes Primark is one of the best structural growth stories in the staples sector with profits set to treble to 2bn by 2022 as Primark scales up its footprint in Europe and the US. 

While 2015 earnings will be held back by much lower sugar profits, 2016 is set to be the first year since 2010 that all four of ABF’s key divisions (primark, sugar, grocery and ingredients) will show profit growth at the same time. 

The fortunes of the rest of the European Food sector looking challenged so ABF’s hard currency profits and improving cash generation are also added attractions. SocGen’s target price is 2,950p.

Jefferies has upgraded AstraZeneca (LON:AZN) for similar reasons, namely the share price has fallen to far recently.

“The recent pull back in the shares offers a good entry point to gain exposure to the IO pipeline and a potential second bid from Prizer. 

The broker adds that Astra has also pulled ahead of Bristol Myers in combination immunotherapy of non-small cell lung cancer treatments. 

‘Buy’ from ‘hold’ with a 5,000p target price is Jefferies new view. 

TSB (LON:TSB) shares, meanwhile, have sharply underperformed other UK banks over the past 8 weeks, falling 10% while Barclays (Buy), Lloyds (Buy) and RBS (Hold) have risen by 2-3%. 

Investec reports that one investor told it recently that TSB is “simply too boring”. 

“For us, this is one of its greatest virtues with, we believe, unparalleled tail-risk protection, a high quality loan book, low-cost funding and outsized capital ratios.

The price now adequately compensates for a weak near-term return on equity outlook  hence the upgrade to buy with a 295p target price.

Deutsche Bank remains keen on the quoted housebuilders and says that at current share prices, the sector looks set to pay up to an 8% dividend yield in 2015.

As other yield plays face increasing uncertainty, this yield will become increasingly attractive, believes the broker. 

Moreover, as natural scale and land buying tapers to replacement levels, yields caould rise to over 10% yields, a level that Deuitsche bank sees as sustainable for at least a 3 year time period, if not significantly longer. 

“We believe these dividend yields will become increasingly difficult to ignore”.

Buy Barratt Developments (LON:BDEV), target price 506p, Bovis Homes (LON:BVS target 1,063p) and Taylor Woodrow (LON:TW target 165p). 

Armadale Capital (LON:ACP)has has announced the resource at its Mpokoto gold project in the DR Congo has risen by 34% to 678,100 ounces of gold from 506,700 ounces.

Within this, the oxide component has increased to 159,000 ounces of gold from 119,000 ounces.

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