Broker round-up: Dunelm, investment cos, Vodafone, Wood Group, New Britain Palm Oil, Caza, OPG

JP Morgan Cazenove has snuggled up to bedding and curtains seller Dunelm, moving its revcommendation to overweight. Meanwhile, Maacquarie takes a butcher's at the investment company sector, downgrading a handful of stocks.


Dunelm (LON:DNLM) received a fillip as blue-chip broker JP Morgan Cazenove showered the retailer with praise and upgraded the stock.

“In our view [it] is one of the highest quality stocks in the sector,” said analyst Georgina Johanan in a note to clients.

“It offers a strong management team with an excellent track record, a robust balance sheet and strong cash generation, and a top-line roll-out opportunity which, although slowing, remains ahead of national space growth from UK-listed peers.”

Raising her recommendation to ‘overweight’ from ‘neutral’, Johanan valued Dunelm at £10. Currently, the shares are trading at 833p each for a rise of 2%.

The most active (almost hyperactive) broker of the morning was Macquarie, which has taken a forensic look at the investment companies.

It has gone to ‘outperform’ from 'neutral' on Ashmore (LON: ASHM), Close Brothers (LON:CBG), Brewin Dolphin(LON:BRW), 3i Group (LON:III), St James's Place (LON:STG) and London Stock Exchange (LON:LSE).

Also among the upgrades was Antofagasta (LON:ANTO), with Numis moving to ‘hold’ from ‘reduce’ and HSBC, with Investec going to ‘add’ from ‘hold’.

On the downside, Nomura shifted Vodafone (LON:VOD) to ‘reduce’ from ‘neutral’.

Caza Oil & Gas’s (LON:CAZA) newly added Igloo well can lift production towards the 2,000 barrels oil equivalent per day marker, according to Cenkos analyst Ashley Kelty.

The North America-focused oil junior has just acquired agreed to acquire a 30% stake in the East Marathon Road property, where the Igloo well is being fast-tracked with drilling beginning in the next week. It rates the stock a ‘buy’.

Sticking with Cenkos, but looking at the Indian power generation sector, the broker assessed the potential of OPG Power Ventures (LON:OPG) earlier.

Analyst Andrew Blain, in a note, pointed to the “interesting read across” of a US$125mln refinancing by Indian renewable power firm Greenko – which is borrowing the money for six years at a 5% annual rate.

He highlights that Greenko continues to invest in the Indian Energy sector and US$55mln of the new funds will be put into portfolio development.

This validates the large opportunity that remains in the Indian power sector, Blain said.

Looking specifically at OPG, the analyst says OPG, as it expands, will soon be generating significant cash flows and it will be able to self-finance.

OPG currently runs three coal-fired power stations in India, and has a significant development pipeline.

“We highlight that OPG, which has financed its projects through equity and straight bank debt, is approaching an inflection point where additional capacity is expected to come on stream which will near-treble total energy produced.

“With coal costs remaining relatively stable and the potential for a tariff increase, we remain positive on the outlook,” the analyst said, as he repeated his ‘buy’ advice.

Finally, Credit Suisse described the oil services group Wood (LON:WG.) as being “comfortingly consistent” while saying today’s update could prove to be a catalyst.

“Investors ought to be relieved with an IMS entirely consistent with half year results, with management continuing to guide to 2014 performance being in-line with expectations, up on 2013, and driven by growth in PSN Production Services.”

Credit Suisse rates the stock ‘outperform’ with an 890p target price.

Broker Liberum rates New Britain Palm Oil (LON:NBPO) a 'buy' following the news that Malaysian group Sime Darby has made a £1.1bn takeover offer for the firm, targeting a price of 715p a share, saying it believes the offer is likely to be successful.

Interestingly, it noted that last week Sime Darby had said it had not decided to proceed further on the proposed acquisition of New Britain.

"We believe that Sime Darby made this new decision to proceed with the offer following the receipt of written confirmation from the PNG Prime Minister that the offer is not contrary to PNG's national interest," said the broker.

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