How about mining for a recovery in 2016?
A brave call, but it’s too early for UBS, which sees scope for metal prices to fall even further and has cut its base metal forecasts by up to 22% over the next three years. Copper is 'trimmed' 15-22%.
The Swiss broker identifies three potential catalysts that would shift its view: Supply side shuts; a US rate tightening cycle; and a lift in China's infrastructure and property construction.
“But on each of these we are cautious,” it adds.
For the coming year, it says stick with miners with low costs and strong balance sheets but it does suggest potential winners if commodity prices do start to revive.
On a 2-3 year view, UBS says the risk versus reward is most attractive for Glencore (LON:GLEN) in copper and zinc, BHP (LON:BLT) in oil and copper and Fresnillo (LON:FRES) for silver/gold upside combined with significant volume growth.
Double-digit revenue growth for 18 years is something miners can only dream of, but restaurant owner Restaurant Group (LON:TRG) can potentially achieve it believes UBS.
The broker has started coverage on the Garfunkel’s, Chiquito and Frankie and Benny’s chain owner with a ‘buy’ rating and 860p target price.
UBS sees plenty of scope for the roll-out story to continue and believes the expansion potential could be four times TRG's own target.
“Our detailed analysis of the existing restaurant locations of its key brands F&B, Chiquito and Coast to Coast versus town population density suggests over 1,000 possible additional locations.”
AstraZeneca’s (LON:AZN) acquisition of cancer drug developer Acerta is a high price (up to $7bn) for an asset with relatively limited clinical data, says Deutsche Bank.
It adds the price likely reflects the competitive nature of the transaction given excitement over the potential of Acerta’s key pipeline drug ACP-196. The drug could have significant clinical advantages over AbbVie/J&J’s Imbruvica.
Astra sees sees peak sales of ACP-196 of more than $5bn, which would more than justify the price paid while sales of more than US$2.5bn would likely make the deal value accretive, adds the broker.
Housebuilder Bovis (LON:BVS) has had a disappointing year but can close the gap on its peers, suggests UBS. A 40% discount to sector is too great and not pricing in any improvement. Buy, but the target price drops 11% to 1,290p.
Retailer N Brown (LON:BWNG) is another to get a target price reduction, this time from Jefferies to 415p (from 430p). Another mild end to the year has created challenging retail conditions through to the start of December and profit forecast have been trimmed accordingly.