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Broker Round-up II: North River Resources, Alliance Pharma

Broker Round-up II: North River Resources, Alliance Pharma

Exploration work at North River Resources’ (LON:NRRP) Namib lead-zinc project area could create a much larger mine than currently envisaged.

That’s what SP Angel’s mining analyst John Meyer thinks after an expansion of the licence area around the mine.

“There is good potential for further discovery and for extension of the existing mine resource,” said Meyer.

At the same time, North River has allowed its Ubib exploration licence to lapse due to a lack of commercial prospectivity and a ban on nuclear fuels exploration licences in Namibia. The Brandberg joint venture with Extract Resources will also be dissolved for similar reasons.

Meyer said his valuation of the company attributed no value to the Ubib licence, whereas “the Namib mine has significant value within easy reach of its [North River’s] own infrastructure and could be brought back to production relatively quickly on its existing resource”.

North River is to review the structural geology of the area and to run geochemistry and geophysical programmes over the ground, with a view to seeing whether the mineralisation seen at the Namib mine repeats in other areas of the new licence.

“Any discovery here could add significant value to the company,” Meyer claimed.

The most recent addition to Alliance Pharma’s (LON:APH) medicine chest is a good move in the eyes of Investec.

“We think Alliance’s most recent acquisition is another positive step for the company, in keeping with the current portfolio, and diversifying revenues away from the UK market,” said Investec’s Nicholas Keher.

However the analyst thinks the shares are set for a pause for the time being and moves his recommendation to ‘hold’ from ‘add’.

His target price meanwhile edges up to 35.8p after a good run from the share price lately.

“Although we envisage management making more acquisitions to return Alliance to growth we expect the shares may mark time, for now, and we move to Hold from Add.”

Deutsche Bank analysts have been crunching the numbers for newspaper publisher Daily Mail & General Trust (LON:DMGT).

And in their opinion, they do not add up. They do not understand the general positive perception of the company from rival analysts, downgrading the shares from ‘hold’ to ‘sell’.

Instead, their calculator tapping points to profit and loss metrics masking slow cash progress, the national papers in decline, and a poor track record from the digital side of the nationals, such as the Daily Mail and Metro.

The online sites have been propping up Daily Mail’s figures against falling print sales. But Deutsche sees a litany of failures from the division, the latest of which is the deferral of MailOnline profitability to 2015-17.

“The more we compare this reality to perception (highest rated in peer group, assets considered to have high growth potential), the more surprised we are by the gaps that emerge,” said analyst Mark Braley.

His target price falls from 660p to 590p.

Panmure Gordon meanwhile warned the “nasty bears” to go away, suggesting they want to get their paws on the DMGT honeypot.

“In our view, the equity story remains very attractive and we are hyper-bullish. Near-medium term, there are 4 supportive factors: 1) The Pension deficit is now shrinking; 2) Ongoing buyback; 3) Online assets increasing in value; 4) Major Greenlight short position.”

It has a ‘buy’ recommendation and £10.10 target price.

The City was split over Imagination Technologies’ (LON:IMG) full-year results on Wednesday.

Falling licensing revenues have hampered the company, whose graphics chips power Apple’s iPads and iPhones. Booming demand for smartphones and tablets though has failed to lift Imagination’s profits, which fell last year.

Imagination is hoping to snap up 50% of the global smartphone market.

“We believe the goal is achievable as IMG is well placed to continue to take market share, as it did at Samsung earlier this year and is at the forefront of the shift towards emerging market smartphone growth, through key customer MediaTek,” said Morgan Stanley, which has an ‘overweight’ rating on the shares.

It was buoyed by the strong royalties that beat it expectations.

finnCap was less optimistic. It was disappointed by “a poor set of results”, with pre-tax profit down from the year before.

Investec was even more downbeat as it placed its recommendation under review until after a meeting with management.

The market is underestimating the ‘core’ return of Barclays’ (LON:BARC) investment bank.

That’s the view of Morgan Stanley’s Chris Manners, who lifted his target price by a touch to 431p and kept his ‘overweight’ stance on the lender.

He also reckons investors could be missing the cost-cutting potential at the investment banking arm.

“As the drag from prior year deferred bonuses reverses, LIBOR charges do not recur, and transform savings are delivered, we think a 59% cost:income ratio should be achievable in the IB [investment bank].”

JD Sports (LON:JD.) is worth browsing, says Bethany Hocking at Investec. She was impressed by a strong showing from the sports retail division, which helped offset weaker sales from fashion and outdoor.

The share price rises seen in the sector hoists her target price up to 940p, with a ‘buy’ tip from the analyst.

“The core business is performing well and the sector discount remains significant,” she added.

Two companies have fallen on the stock market recently.

But the declines from British American Tobacco (LON:BATS) and Primark owner AB Foods (LON:ABF) offer investors a good price to buy the shares at.

The former’s shares have underperformed rival Imperial by over 9% - a lag which Panmure Gordon thinks is overdone, while UBS values budget clothing retailer Primark alone at just under £9bn.

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