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Broker spotlight: Shell, BP, Admiral, Croda, Aureus Mining, Telit ...

Last updated: 12:46 10 Jul 2014 BST, First published: 11:46 10 Jul 2014 BST

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Brokers are shuffling their positions ahead of the latest quarterly updates from the major oil groups.

Iit was Deutsche Bank’s turn today to carry out a bit of tinkering with an upgrade of Royal Dutch Shell (LON:RDSB) and a downgrade of rival BP (LON:BP.).

For the sector, the broker believes that the majors' current 4.8% dividend yield will look increasingly attractive to history, equity markets and the yield curve.

Deutsche now has a price target of 2,850p for Shell and a 'buy' rating while the target for BP, which is still suffering from the overhang of the Gulf of Mexico oil spill, is 550p with a ‘neutral’ rating.

Exane BNP remains a bear of car insurance specialist Admiral (LON:ADM) after yesterday’s trading update.

The company announced it was issuing £200mln of tier-two subordinate debt to support its solvency position ahead of the onset of Solvency II.

Exane said Admiral’s source of capital is the reserve buffer in the business, which is declining and putting pressure on the payout ratio.

According to Admiral:  “The additional capital also sets us up well for the growth we expect from all our businesses in the coming years whilst being consistent with our existing dividend policy,” while ratings agency Fitch added the proceeds would also support  international expansion. 

Exane said: “In our opinion, this is leverage on top of leverage from the reinsurance structure; the group is undercapitalised for the risks and while earnings have been exceptional, the outlook is less clear.”

‘Underperform’ with a 1,064p target is the broker’s view.  

Investec is being more charitable with Royal Bank of Scotland (LON:RBS), where analyst Ian Gordon has upgraded to 'hold'. 

The broker still expects RBS to remain loss-making through 2014/15, but after its share price recent decline the risk/reward is marginally skewed to the upside and it is time to close short positions again, he said. 'Hold' is its new stance. 

UBS, meanwhile, has slapped a 'sell' recommendation on chemical group Croda (LON:CRDA), which, in the opinion of the broker, trades on hopes of a takeover despite the company warning on a loss of pricing power and increasing competition.

UBS notes that Croda has been mooted as a perennial bid target and there are no obvious buyers in the US with the exception of Platform Acquisition Holdings, which acquired Chemtura AgroSolutions in April. 

In the absence of a change in company strategy, UBS has cut its rating to ‘sell’ from ‘neutral’.  

Aureus Mining (CVE:AUE, LON:AUE) has posted another set of good drill results from the Ndablama gold deposit  in Liberia. The highlights of the fourth-phase of drilling include a grade of 2.4 grams per tonne of the precious metal over 30 metres from 211 metres below surface among others. 

John Meyer, of resources boutique SP Angel, said: "These are impressive grades over very good intersections. They can only add value to the New Liberty mining project."

M2M specialist Telit’s (LON:TCM) first half revenue growth was 3% ahead of Canaccord’s estimates at US$138m vs $134.0m) or 27% yoy. 

Longer term, the potential in telematics is even greater it said as the ATOP integrated hardware platform that enables vehicle manufacturers to implement services such as eCall, the European initiative for rapid assistance to motorists involved in collisions, ramps up from  2015. 

Canaccord has raised its revenue forecast for 2015 by 6% and for 2016 by 13%, which translates in to a leveraged gain for earnings of 9% and 38% respectively. 'Buy' with a price target of 305p is the broker’s view.

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