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Broker spotlight: Oil super-majors, Falcon Oil & Gas, Sky, UK property companies

Published: 10:08 01 Sep 2015 BST

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The sky is not exactly falling in on pay-TV company Sky (LON:SKY), despite increased competition from BT, but Jefferies does think the price is toppy.

The broker has cut its price target from 975p to 915p while maintaining its ‘hold’ recommendation, noting the shares outperformed year-to-date despite no supporting upgrade to forecasts.

July’s results were OK, but illustrated how operating leverage has leaked away in the UK, where BT is making life difficult, leaving the group increasingly reliant on Germany and Italy for profit growth, where management is tempering expectations.

Falcon Oil & Gas (LON:FOG) has made an encouraging start to its carried drilling and testing programme, says Cantor Fitzgerald, after the energy company released drilling results for the Kalaa -1 well in Australia.

The shares are up 13% at 7.75p today, but Cantor’s price target of 21p suggests it thinks this is just the beginning.

“Our valuation ascribed 16p/share to Falcon’s Australian assets, 4p/share to its South African acreage and 1p/share to financial items; we therefore retain our BUY stance,” the broker said.

A bit further up the food chain in the energy sector, Deutsche Bank (DB) has tweaked its price targets for the big three London-listed giants to reflect softening oil prices.

The German bank reckons that in the current uncertain environment, the “super-majors” are the sector constituents to back, “all of whom are, we believe, committed to rebalancing their cash cycles and making whole currently scrip-diluted income to shareholders.”

Nowhere does this appear more apparent than at BP, according to DB, which is currently offering a dividend yield of 7.1%. Nevertheless, DB cuts its price target for BP to 450p from 485p, still comfortably above the current share price of 352p.

DB’s preference, however, is for bid target BG Group (LON:BG.), as it trades at a 14% discount to the implied value of the offer from Royal Dutch Shell.

BG’s target price is shaved to 1,355p from 1,460p while Shell’s ‘B’ shares (LON:RDSB) see their target pared to 2,200p from 2,425p. HSBC, meanwhile, upgrades BG from ‘hold’ to ‘buy’, with a 1,170p price target, while Royal Dutch’s ‘A’ shares – the ‘B’ shares tend to be the ones held by British investors – also get upgraded from ‘hold’ to ‘buy’.

Broking heavyweight JP Morgan Cazenove has done a trawl of the property sector and, having crunched some numbers, adjusted a slew of price targets.

Adjusted upwards have been: British Land (LON:BLND), from 970p to 1,000p; Capital & Regional (LON:CAL), from 66p to 78p; Capital & Counties Properties (LON:CAPC), from 450p to 490p; Derwent London (LON:DLN), from 3,900p to 4,150p; Great Portland Estates (LON:GPOR), from 920p to 950p; London Metric Property (LON:LMP), from 185p to 195p; Segro (LON:SGRO), from 490p to 500p; Shaftesbury (LON:SHB), from 980p to 1,050p; St Modwen (LON:SMP), from 510p to 530p;  plus ersatz property companies Big Yellow (LON:BYG), from 780p to 790p, Unite (LON:UTG), from 700p to 770p; and Workspace Group (LON:WKP), from 980p to 1,100p.

Grainger (LON:GRI) sees its price target upped to 260p from 245p but the rating goes from ‘overweight’ to ‘neutral’, as does the rating for Helical Bar (LON:HLCL), even as the price target is nudged up 10p to 480p.

Hammerson’s (LON:HMSN) price target is cut to 730p from 740p while Intu’s (LON:INTU) is trimmed to 370p from 390p.

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