Broker spotlight, including Standard Chartered, Serco, BT, IAG, Smith & Nephew, Ergomed ...


Is it time for Asia -focused bank Standard Chartered (LON:STAN) to depart the UK and locate its head office somewhere the regulations and levies are less onerous?

Reports over the weekend suggested it was a possibility after the higher bank levy unveiled in the Budget and new American chief executive.

And JP Morgan reckons the numbers are starting to stack up in favour.

The US broker says StanChart was the most affected by the Budget’s higher bank levy, which will reduce earnings per share by 13% in 2017. 

The group has previously indicated that the costs of a re-domicile would offset the earnings benefit but the broker calculates equity returns would rise by at least 1.3% assuming a US$2.5bn one-off charge in 2017. 

A strong case for re-domicile is now on the table, adds the broker.  

The new chef executive has also been a material positive, it adds, as it set a new price target of 1,250p compared to 1,050p previously.

JPM also raised its recommendation to ‘overweight’ from ‘neutral’.

Citigroup has also kept its ‘buy’ rating on StanChart, adding that Bill Winters' recent appointment as chief executive has put the spotlight back on an unloved stock.

“Value can be unlocked by prioritising the 3Cs: Costs, Credit and Capital, helped by macro tailwinds or the 2Ms: Margins and Modi-mania,” said the broker.

Its price target moves up to 1,300p from 1,250p and the bank is back on its Western Europe focus list.

Goldman Sachs has raised its rating on medtech and perennial bid target Smith & Nephew (LON:SN.) to ‘buy’ from ‘neutral’.

The firm has been a notable under-performer driven by a debate on whether it still is a likely acquisition target. 

Goldman says it is and sees S&N being acquired by a larger player even though are many hurdles to a potential transaction. The target is now 1300p including a bid element.

Cruise operator Carnival (LON:CCL) is cut to ‘hold’ from ‘buy’ by Deutsche Bank due to the significant moves in euro and sterling.

This may see earnings guidance this year reduced by 8% and consensus coming back by 5 to 10%. 

Long term the outlook is positive, but with only 5% upside to its £34 price target, ‘hold’ is the new stance.

Troubled outsourcer Serco (LON:SRP) gets a thumbs down from German bank Berenberg as the week begins, with the recommendation moving to 'sell' from 'hold'.

The broker cites the prospect of a long turnaround now the strategic review is completed and a "chronic" lack of free cash flow generation.

On the flipside, Societe Generale takes a shine to telecoms giant BT (LON:BT.A) repeating a ‘buy’ and hiking the target to 540p from 480p.

The heavyweight broker expects to see consensus upgrades driven by the purchase of mobile firm EE and rising synergies, after a busy but productive quarter for BT.

Also today, Liberum provides lift off to airlines operator IAG (LON:IAG) kicking the target price  to 700p from 600p, and has the stock as its top pick.

Also in the transport world but Terra firma, coach operator National Express (LON:NEX) sees US broker Jefferies lift its target price to 350p from 315p and repeats a 'buy' call.

Europa Oil & Gas (LON;EOG) has completed drilling of the Kiln Lane (EOG:50% and operator) onshore UK well. 

Wirelinelogging showed that the sandstones were water wet despite the well showing oil and gas shows while drilling. 

Broker Finncap adds that testing operations are ongoing at the Wressle well, but it takes 3.4p for Kiln Lane away from its target price, which drops to 11.6p, from 15p previously.

Pharma services group Ergomed (LON:ERGO) has announced the opening of a new office in Taiwan, which is the company's first office in Asia. 

Ergomed currently works with a number of Taiwanese companies and Stifel believes having on-the-ground support will be critical for gaining new clients in the area.

Ergomed currently trades at a 2015E P/E of 15.4 times, a 20% discount to its contract research peers. Buy says the broker.

Horizon Discovery (LON;HZD) has announced an OEM agreement with ArcherDX , a leader in Next Generation Sequencing (NGS) fusion detection.

Panmure Gordon expects Horizon to push ahead with commercial relationships and today's deal is only likely to be the first OEM agreement of many. ‘Buy’ is the view.

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