Yesterday’s results from the big beast of the house-building sector, Persimmon PLC (LON:PSN), have generally got the thumbs-up from brokers.
Citigroup has increased its price target to 1,775p though it remains neutral on the stock, which currently trades at 1,911p.
The bank has upgraded its earnings forecasts modestly on the back of the group’s strong margin performance and superior returns, as revealed in the interim results.
Read: Persimmon profits rise as customers shrug off Brexit
“The upcoming autumn selling season remains a crucial test for the sector and we see upside risks to estimates if the current sales rates persist into autumn,” the broker said, though for now it remains mindful of the possible detrimental effect on the sector of the UK’s decision to leave the EU.
JP Morgan Cazenove has also tweaked its earnings estimates for Persimmon, and nudged up the share price target to 2,000p from 1,950p.
“While we are still cautious about extrapolating seven weeks of trading, the strength of the current sales rate (+17% y/y) gives us confidence that new build is likely to outperform existing home sales, aided by Help to Buy. Under a blue sky scenario where market conditions hold up into 201717, we see 25% upside to our new estimates, implying 10% earnings growth y/y,” Caz’s Construction, Building Materials & Infrastructure team said.
Caz’s rating remains ‘overweight’.
Deutsche Bank said Persimmon’s results were reassuring, with first half profit before tax 3% ahead of its forecast.
“However, it is the trading since the Brexit vote where the greater positive surprise was evident, with both site visitors and private reservation rates up markedly YoY [year-on-year],” the German bank said.
With one of the highest returns on capital employed in the sector at 35.6%, a growing net cash balance, and a strong dividend yield, Deutsche believes the shares have much to commend them, but it thinks there are better risk/reward scenarios elsewhere in the sector.
Deutsche’s price target has been raised from 2,072p to 2,092p.
While Paddy Power Betfair has grabbed the attention this morning with its first set of results since its recent merger, Deutsche Bank has extolled the virtues of its less fashionable rival, William Hill PLC (LON:WMH).
It notes that of the 18 analysts following the stock, 10 are sitting on the fence, four are bearish and three are slightly equivocal in their positive recommendations, opting for the wishy-washy ‘overweight/outperform’ rating.
Deutsche is the only unashamed committed buyer of the stock, with a 390p price target that is some 60p above the current trading level.
In the bank’s view, either the company sorts out its under-performing online business or some rival will move in and snap up the company, as almost happened with the concert party comprised of The Rank Group and 888.
Any sign of a pick-up in the online performance should give a boost to the shares, Deutsche argues, while the board is obviously confident of its turnaround plan, otherwise it would not have rejected a proposed bid some 40% above the prevailing share price.
Keep on tucking into Domino’s Pizza Group PLC (LON:DOM) is the advice from German bank Berenberg.
The company has now achieved 11 successive quarters of double-digit like-for-like sales growth in the UK, and the international divisions have experienced a promising pick-up in performance.
The bank feels the pizza delivery company is well-placed to maintain its momentum even if the UK economy does experience a downturn. It is becoming increasingly confident of the company’s ability to expand the UK estate to at least 1,200 sites in the medium term.
Current year earnings estimates have been upped by 4%, while estimates for the next two years are hiked 5%. The price target has been bumped to 425p from 400p.
Ticketing and queue jumping software specialist accesso Technology Group PLC (LON:ACSO) is a great company, in N+1 Singer’s view, but with the stock up 45% since the EU referendum investors who have not already got the stock might have missed the boat with this one; holders should keep their shares, N+1 advises.
Read accesso has a spring in its step after good 2015
Read Arian Silver given more time to consider tailings project
Mexican miner Arian Silver Corporation (LON:AGQ) gas extended its option over the Noche Buena gold-silver tailings project by another 60 days at no extra cost.
Dr Ryan Long at Northland Capital said the current batch of metallurgical tests should determine if a saleable gold concentrate can be produced at Noche Buena.
“A processing flow sheet design is being developed based on 500t per day throughput that would equate approximately to a five-year operation,” Dr Long noted.