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Broker spotlight: Oil groups slashed by Deutsche Bank as crunch looms

Broker spotlight: Oil groups slashed by Deutsche Bank as crunch looms
Deutsche takes axe to target prices as oil sector struggles.

Not unsurprisingly it is downgrades that hold sway this morning as the broking community reassesses in the wake of the continued slump in commodity prices.

Deutsche Bank leads the way with a swathe of price target reductions across the mid-cap oil explorers and producers.

“We revise our long-term (2018+) oil price from $80/bbl to $70/bbl, reducing our NAVs by 10-40% (mean 25%).

“Our target prices, which are a direct function of our NAVs and target P/NAV multiples, are also revised down materially (-20% on average),” said the German broker.

For the companies themselves, Tullow Oil (LON:TLW) now has target of 230p from 365p, Cairn (LON:CNE) 200p (220p), Genel (LON:GENL) 520p (700p), Ophir (LON:OPH) 125p from 140p and Premier Oil (LON:PMO) 140p from 215p.

Brewers and pub groups are also getting the red ink treatment after yesterday’s disappointing update from Mitchells and Butlers (LON:MAB).

HSBC and JP Morgan both downgrade the All Bar One group, to ‘hold’ from ‘buy’ in the case of HSBC while JPM trims its price target by 20p to 420p.

HSBC seems gloomy on the pub sector overall as rival Greene King also gets downgraded, to ‘reduce’ from ‘buy’.

China has been on the causes of the recent market shake up and Burberry (LON:BRBY) is big in China, which may explain Citigroup lopping 160p of its target price to 1520p.

Wearing the contrarian’s hat today in Investec, which has raised its view on beleaguered mining giant Glencore (LON:GLEN) to ‘hold’ from ‘sell’.

Though as the shares of the one-time master of the mining universe have slumped by a fifth in five days, maybe it’s not such as contrarian move.

Contractor Balfour Beatty (LON:BBY) meanwhile is a buy still for Liberum with a 320p target.

“The rest of the results season confirmed our view that there is a meaningful recovery in UK non-residential construction.

“Volumes are clearly better, which should help drive cash flows across the sector, but the terms of trade, in particular risk transfer, also appear much better.”

Coloured gemstones group Gemfields’ (LON:GEM)  latest update for the Kagem emerald mine in Zambia has impressed Panmure Gordon.

“We believe that despite a quiet FY2014 there remains significant potential for value enhancement.

“We reiterate our Buy recommendation and 75p price target derived from a blended average of NPV/EPS.”


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