Credit Suisse reckons 888 (LON:888) would be a better buyer of bwin.party (LON:BPTY) from a strategic point of view despite Sportingbet owner GVC (LON:GVC) tabling an improved offer.
Merging with 888 would create a stronger business which would be best placed to turn around the bwin.party business, says analyst Ed Birkin, who also believes the emphasis on the cost synergies suggest in the possible GVC combination is misguided.
“When bwin.party's Board recommended 888's bid, there was a certain level of shareholder disappointment over the scale and timing of the estimated synergies,” Birkin said in a note.
“However, we viewed this positively, as a focus on cost synergies often has adverse effects on revenues – something which we feel has contributed to the scale of bwin.party's top line declines.
“Therefore, GVC's belief that it could get double the cost synergies is a concern for us, and see more strategic rationale to 888's offer.”
Credit Suisse has upgraded its view of bwin.party to ‘neutral’ from ‘underperform’, and set a 110p price target. It believes a deal is now very likely after GVC offered £1bn to trump 888's £900mln takeover bid.
Elsewhere, Dublin based Davy moved Ladbrokes (LON:LAD) to ‘neutral’ from ‘underperform’.
Consumer goods group Reckitt Benckiser (LON:RB.) was the subject of a few blue-chip upgrades; withDeutsche Bank, Barclays Capital and JP Morgan Capital all increasing price targets (but not recommendations).
Deutsche raised its target price to 6,400p: “RB is now ‘only’ 1-2% off the kind of growth rates we were used to for a decade (ie 6%-7% LFL) when the market environment was far more supportive. Impressive really.”
Aveva Group (LON:AVV) is no longer viewed bearishly by Goldman Sachs which upgraded to ‘neutral’ from ‘sell’.
Investec upgraded Centrica to ‘buy’ from ‘hold’.
HSBC downgraded Drax (LON:DRX) which today said it expects a £90mln dent in its accounts over the next eighteen months as a result of government changes to tax incentives for renewable energy generation.
Theme park and attractions group Merlin Entertainments (LON:MERL) had its price target price reduced byBarclays Capital to 460p from 510p, though the investment bank’s ‘overweight’ rating is retained.
Deutsche Bank remains a buyer even so and said like the cautious tone of the statement seemed like the Alton Towers owner was making sure that the impact will be no worse than announced yesterday. Its target price is unchanged at 500p.