Broker spotlight - BG/Shell. Sky/Vivendi, Rio Tinto, Apple, Stagecoach ...


Today has been an M&A fest for the City scribes with three potential mega takeovers to get to grips with.

Top of the pile is the £47bn deal between Shell and BG, principally because this has been agreed and looks done and dusted.

RBC reckons the key attractions for Shell are BG's deepwater assets in Brazil and its LNG portfolio, which combined with Shell's would represent 40mtpa or roughly 16% of the global LNG market.

In addition, Shell would acquire significant growth options including Tanzania and Lake Charles LNG.

In Brazil, BG's assets would give Shell a further foothold in one of the lowest cost basins in the world, and could add potential synergies with Shell's Libra assets.

On rough calculations, the deal would be 10% dilutive to Shell's 2015 EPS assuming no cost synergies, and would require US$1.6bn of synergies to breakeven on this basis.

Liberum, meanwhile, does not rule a bid for Sky (LON:SKY) from Vivendi despite denials from the French media giant today.

The broker sees benefits of a pan-European pay-tv giant combining Sky's UK/Italian/ German assets with the French pay-tv business of Canal+.

Vivendi has €16bn-17bn net cash pro-forma and a deal would explain its reluctance to return more cash back, but Liberum rates Sky a sell nonetheless.

The broker also has sell recommendations on Glencore (LON;GLEN target price £2) and  Rio Tinto (LON:RIO TP £26) after the Australian Treasurer Joe Hockey quashed the chance of a merger between the pair in a forceful comment at a private meeting.

Societe Generale has done a “deep dive” into Apple’s (NASDAQ:AAPL) recent sales numbers and concludes the number of iPhone 6 and 6 Plus models declined as a percentage of total units sold in the March quarter.

As a result there is no upgrade to its revenues and earnings forecasts and Apple shares are downgraded to ‘hold’ from ‘buy’, with the price close enough to its US$130 target to be deemed high enough.

SocGen did, though, raise its target price on Marks & Spencer (LON:MKS) to 640p from 524p and upgraded to 'buy' from 'hold'.

The broker says it had underestimated the short-term like-for-like (LFL) sales recovery potential at Marks by around two percentage points.

Soft online comparisons will last well into next year, indicating a greater improvement in LFL sales trends than SocGen previously expected.

Investors should avoid boarding National Express Group (LON:NEX), reckons Nomura.

The broker rates the firm the worst ride among transport shares, cutting its Neutral stance to Reduce.

It stuck with its 'Buy' stance on Stagecoach Group (LON:SGC) though, despite dropping its target price by 10p to 430p.

On Firstgroup (LON:FGP) Nomura remains 'Neutral' although analysts at HSBC removed their 'Overweight' rating on the bus and rail business.

Elsewhere, JP Morgan Cazenove had a dig at the miners.

It remains 'Underweight' Anglo American (LON:AAL), 'Neutral' BHP Billiton (LON:BLT) and 'Overweight' Rio Tinto (LON:RIO). 

However, the heavyweight broker decided to trim its share price target on each.

Experian, meanwhile, (LON:EXPN) has been handed a decent upgrade from Credit Suisse

The Swiss bank now reckons EXPN shares will Outperform and topped up its target price by 200p to 1300p.

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