Broker Roundup: 3i, Petropavlovsk, SABMiller, Medusa Mining, Stratex, Tertiary Minerals, Oilex, PetroNeft, Helius Energy, Lo-Q


Private equity and venture capital firm 3i Group (LON:III) is “an attractive choice for deep value players”, according to Citigroup in its latest research note.

Citi said that 3i is attractive because of its undervalued portfolio of assets combined with a conservative balance sheet and credible net asset value (NAV) growth prospects. The broker reiterated its ‘buy’ rating for 3i’s shares, raising its target price from 340 pence to 350 pence.

Nomura said today that SABMiller’s (LON:SAB) bid for Foster’s has given it no reason to change its “reduce” recommendation for the stock. Furthermore, Nomura indicated it could cut SABMiller’s target price if it ends up acquiring the Australian brewer, depending on the synergies that will result from the deal.

Nomura’s analyst Ian Shackleton said that while the bid should not be a surprise to the market, the timing seems to be odd. Shackleton expected a move after Foster's full year results announcement in August. The offer instead appeared to be a response to the joint bid from Modeno/Molson/Coors, which appeared to have been ruled out last week.

Even with a rival bid unlikely, the fact that Foster’s rejected the bid and did not enter negotiations leaves SAB in a weak bargaining position and it would have to up the offer to secure Foster’s board approval, said Shackleton.

Petropavlovsk (LON:POG) one of the largest gold miners in Russia, put out a reassuring update on its operations yesterday but broker Citi believes its persistently missed guidance over the 2010 year means the market remains wary about its prospects over the current year. Still, Citi analysts believe the big fall in its share price this is year to date looks overdone.

Citi analyst Jon Bergtheil says that while the company’s missed guidance of last year continues to weigh on sentiment over the stock, and market caution is warranted, the 35% fall in its share price since the start of the year “is probably an overreaction to the risks”. Looking at the positives for the group, Bergtheil notes that unlike some peers, POG does not operate in the Ivory Coast, Tanzania, Egypt or Peru.

He says: “POG’s challenges relate to being able to deliver 600,000 ounces in 2011and building a successful pressure oxidation plant for its future refractory material. We believe that POG’s probability of success in these areas is higher than the probability of a positive political environment for some of its peers.”

Medusa Mining (LON:MML, ASX:MLL,TSE:MLL) is set to make almost £100 million in profit this year, according to Fairfax Securities mining expert John Meyer. The analyst’s assertion came as the group told investors that it expects to produce between 100,000 and 110,000 ounces of gold in the forthcoming year, beginning 1 July, at cash costs of around $200 per ounce.

“Medusa continues to produce gold at a low $200 an ounce cost allowing a high $1,300 an ounce operating margin with growth to 200,000ozpa in process,” Meyer said. “Profits of near $100m are forecast for this year allowing ongoing dividends as well as good headroom for the capital cost of the mine expansion.”

Stratex International (LON:STI) is making rapid progress at its assets in Turkey, according to Broker FoxDavies, which rates the stock a "buy" with a target price of 12.5 pence per share (current price: 7.75p). "We continue to believe that Stratex is rapidly moving forward on getting its Turkish assets into production and has an ever improving suite of prospective exploration assets in Turkey and East Africa," said analyst Peter Rose.

Tertiary Minerals (LON:TYM) offers investors a significant opportunity, according to Seymour Pierce analyst Asa Bridle, because its share price has gone down but its main project is now worth more.

“The fluorspar price has continued to rise strongly since Tertiary published its scoping study on the Storuman project last summer,” the analyst said.

While Tertiary’s shares enjoyed a significant rise until February, the movement since then has been in the wrong direction despite the improving market backdrop and the further de-risking of the project.  Tertiary is trading at a fraction of the project's potential NPV and we believe that a significant opportunity has developed for investors.”

Ambrian repeated a ‘buy’ recommendation for Oilex (LON:OEX),  targeting a price of 40 pence (current share price 20.5 pence), after the company gave an update on its drilling work on the Cambay field in India.

"Oilex is making swift progress at Cambay, with all operations to date moving ahead smoothly. Should drilling operations and the subsequent multi-stage fracture stimulation operations successfully demonstrate that the ‘tight’ Eocene reservoirs are able to flow at an enhanced rate, we expect to see a step-change in value as a potentially new and significant source of unconventional hydrocarbons is established," it said.

PetroNeft (LON:PTR) has been significantly marked down, reflecting disappointment over current hydrocarbon flow rates, downgraded production guidance and a likely overall net reserves downgrade, said Ambrian oil analyst Werner Riding. “Whilst we reiterate our ‘BUY’ recommendation, we move to reduce our target price from 108p to 83p,” the analyst said.

Northland Capital Partners responded to yesterday’s interim results from Helius Energy (LON:HEGY) by reiterating its ‘buy’ stance and 54 pence target price for the biomass energy firm’s shares.

The broker said that everything at Helius is proceeding according to plan. “These interim results contain no surprises,” said the broker’s analyst Simon Miller. “Admin expenses remain under control, share based payments were £175k higher and financial income is declining due to the reduced cash balance as further investments are made.” Miller pointed out that all Helius projects are still in the development stage, a point at which no revenue should be expected.

The inventor of virtual queuing systems used in theme parks, Lo-Q (LON:LOQ) has exceeded expectations in the first half of the year, according to Canaccord Genuity analyst Bob Liao. In this morning’s interim results Lo-Q unveiled a strong rise in revenues in what is traditionally a slow first half.

Canaccord’s Liao repeated a ‘buy’ recommendation and increased his target price from 182 to 200 pence a share, in response to the news. “Lo-Q's full-year outlook is positive and we see potential for upgrades, but we leave our forecasts unchanged at this stage due to the strong seasonal second half bias."

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