On a dull day in brokerland a little nugget from UBS on Associated British Foods (LON:ABF) jumped out.
While the London office of the Swiss bank stuck with its neutral stance on the stock, it looked at the potential value that could be added via the US roll-out of ABF’s retail chain, Primark.
The discounter, to just a little fanfare, recently launched its first store Stateside – not in New York, but on one of Boston’s most popular shopping thoroughfares.
Having eyeballed said store myself before it opened, it looked a cut above the pile-em-high emporiums that cornerstone most UK malls.
UBS said its valuation currently assumed a ‘pretty pedestrian’ roll of five new American Primark’s per year.
Double that figure would add 16% to analyst Sophie Hughes’ net present value calculation, while 20 stores a year would boost the NPV by 31%.
Hughes pointed out that Primark is currently opening at a rate of 17 new outlets a year.
Elsewhere the gruel was pretty thin so far as upgrades and downgrades were concerned.
BMO Capital Markets has apparently lifted its call on oil services firm Soco International (LON:SOCO) to ‘market perform’ from ‘underperform’, with a 165p price target.
The negativity continued for valve maker Rotork (LON:ROR) after its profit warning and £125mln acquisition of Bifold, which essentially sees the group increasing its exposure to the contracting oil and gas sector.
Nomura said ‘reduce’, and while Citigroup remained ‘neutral’ (my, those splinters must be hurting), it has cut its price target to 195p from 220p.
On Thursday, veteran Investec analyst Michael Blogg went to ‘sell’ from ‘hold’ on Rotork.
BMO Markets reckoned Premier Oil (LON:PMO) will ‘underperform’ after cutting its recommendation for ‘market perform’, while KAZ Minerals (LON:KAZ) followed the identical journey – though this time it was Exane BNP Paribas wielding the red pen.
Back to UBS and the natural resources team, which spoke to heads of the BHP Billtion (LON:BLT) oil and gas business, which generates more than a quarter of group revenues.
Production guidance was unchanged with a net fall in output of around 7% being predicted, while capital investment is expected to come down by US$2bn to US$3bn next year.
The company ‘remains open to add-on acquisitions’, UBS revealed.
It added: “Overall, the call was reassuring on the quality of the assets (resource, cost position), the focus on continuous improvement and value over volume, and the hidden value in the portfolio (Mad Dog 2, Trinidad etc).”
The team at Switzerland’s premier bank remain ‘buyers’ of BHP Billiton with a £14 price target (current price just under £11).
The logic for the positive stance is one that should resonate with contrarians and value investors alike.
BHP Billiton is the fourth highest yielding stock in the FTSE 100 (it pays out around 7% annually) and has recovery potential if demand for commodities starts to turn.
And finally (as they say on the news), Deutsche Bank updated us on why it remains cautious on the estate agency and price comparison group Zoopla (LON:ZPLA).
It reckons there is the risk it may struggle to integrate recently acquired uSwitch, while the emergence of estate agent-owned site OnTheMarket, to rival Zoopla and Rightmove, could ratchet up the competitive tensions.
In the small cap space, finnCap raised its full-year earnings targets for Constellation Healthcare (LON:CHT) after the firm unveiled a US$14mln acquisition of Phoenix Health.
The broker has a price target of 280p for Constellation shares, which currently trade at 144p.
Earlier this week, the healthcare services company told investors agreed to shell out up to US$18mln for NorthStar Health on Wednesday – meaning it’s spent US$32mln in a matter of days.
Haydale (LON:HAYD) told investors this morning that it has been awarded a number of research grants, totalling over £450k.
The announcement “marks another strong step forward for Haydale”, said broker Cantor Fitzgerald, as the firm seeks to secure opportunity for its functionalised graphene nanoplatelets.
Cantor made make no changes to its Haydale forecasts, and maintained share price target of 200p with a ‘Buy’ rating.
Elsewhere, SP Angel mining expert John Meyer hailed the opening of Wolf Mineral’s (LON:WLFE) Drakelands tungsten mine in Devon – the UK’s first new metal mine in over 40 years.
“The Wolf Minerals team have successfully delivered a major new tungsten mine at a time when, despite the current weakness in commodity prices, there may soon be a real opportunity to assume leadership of the western world’s tungsten industry,” said Meyer.