Broker Round-up Part 2: Providence Resources, Gulf Keystone Petroleum, London Mining, Tissue Regenix and EMED MiningReported by Proactive Investors on Thursday, 10 May 2012 (on May 10, 2012)
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Morgan Stanley has highlighted easyJet (LON:EZJ) as a good investment opportunity given its structural growth and solid earnings per share.
At 7.7 times earnings for this year, the broker sees easyJet as “cheap”, while it says market share gains in business and leisure markets offers an opportunity for a re-rating.
However, analyst Penelope Butcher also notes the risk from airport charge inflation, including a rise of around 40 per cent at Madrid and Barcelona.
The broker remains a ‘buyer’ with an increased price target of 600 pence, up 40 pence against the current price of 523 pence.
The long-term prospects for engineering company Weir Group (LON:WEIR) outweigh the near-term headwinds, according to analysts at Goldman Sachs.
The broker reduced its target price for the company to 2,920 pence from 2,960 pence following disappointing first quarter results but retains its ‘conviction list buy’ stance on the stock.
The Scottish company’s mineral and industrial businesses reported strong trading in the first quarter, but the firm also announced a 26 per cent plunge in sales in the company’s oil and gas division, due to a fall in demand for fracking equipment as natural gas prices continue to drop.
However, Goldman analysts believe that near-term volume declines can be offset through supply management, efficiency gains and the impact of new products.
“We believe the longer-term growth and returns potential in Weir's O&G business remains highly attractive despite the near-term headwinds resulting from industry transition from gas drilling to oil and liquids-rich,” the broker said.
Shares dropped to 1,514 pence yesterday following the results announcement.
G4S (LON:GFS), the official security provider for the London 2012 Olympics, has been upgraded to ‘outperform’ from ‘neutral’ by Credit Suisse.
The broker expects organic growth to accelerate to 9 per cent in 2012, up from 5 per cent last year, due to new contracts in the UK and North America and improved growth from cash solutions.
The Swiss bank said: “We think that 10x 2013E PE and a 3.9% 2013E dividend yield do not reflect either the growth potential or the resilience of the business.”
The broker also raised its target price by 10 pence to 310 pence against the current price of 264 pence, up marginally this morning.
Silver and gold company Hochschild Mining (LON:HOC) is now on Citigroup’s ‘sell’ list after being downgraded from ‘neutral’ as a result of falling silver production levels.
The broker also reduced its target price by 92 pence to 402 pence, while the current price is down 1 per cent today to 433 pence.
Citi analyst Jon H Bergtheil said: “The result of this flat production and sharply rising cost profile (Arcata costs/oz up 50% in 2011, Pallacanta up 34%) is that HOCM cannot afford major slippage in the silver price over these stagnant years. The problem is that the silver price is indeed slipping now.”
The broker clAIMs Mexico-based silver producer Fresnillo (LON:FRES) is a better pick, with a “better political geography” and “steady production growth”.
News that Irish oil explorer Providence Resources’ (LON:PVR) basal reservoir sands that flowed in the recent Barryroe well are widely developed was welcomed by broker Daniel Stewart.
Analyst Kate Fisher said the results “re-confirm the potential that exists at Barryroe” and she reiterated her ‘buy’ rating and 1,344 pence target price on the back of the positive update.
Shares edged up on the news to 514 pence.
Gulf Keystone Petroleum (LON:GKP) today denied speculation that it will conduct a fund raising at 160 pence and announced it will seek legal advice in an attempt to quash the false rumours.
Broker Seymour Pierce said the news should not get investors down as it is a widespread problem among AIM-listed companies and they are by no means the first to seek legal advice on this matter.
Analyst Dougie Youngson said: “We feel that today’s announcement has been a long time coming as the share price has been negatively impacted by bulletin board speculation several times already this year.”
The sale of its 20 per cent-owned Akri-Bijeel asset in Kurdistan, which Seymour Pierce values at US$200 million, would negate the need for an equity fund raise in the near-term.
Youngson, who has a ‘buy’ rating and 524 pence target price on the stock, concludes that given the appetite for assets in the region, it may even go for a higher figure.
Shares shot up 24 pence today to 213 pence.
Following London Mining’s (LON:LOND) impressive first quarter production report announced today, Shore Captal analyst Yuen Low noted that the company's share price had been essentially trending downwards since late last year.
However, Low believes that the 50-day moving average is now starting to level out.
“We believe there to be potential for the share price to rise significantly later in the year as the company demonstrates its ability to produce to expectations, once the short-term headwinds arising from the latest turmoil in Europe have died down,” he said in a note to clients.
Shares were up today at 276 pence, an increase of over 5 per cent.
Regenerative tissue specialist Tissue Regenix (LON:TRX) is one to watch, according to broker Peel Hunt, which is a ‘buyer’ with a target price of 20 pence.
The broker is eagerly awaiting more data after the company made good progress last year.
Peel Hunt analyst Dr Paul Cuddon commented: “We expect TRX to increase investment in the meniscal repair product, porcine heart valve and brain dura in the coming months, and this is reflected by our forecasts.”
Cuddon added that the company is likely to attract interest from bigger players if the dCell process continues to deliver robust data.
The share price stands at 12 pence today.
Fairfax analyst John Meyer has a ‘buy’ stance on EMED Mining (LON:EMED) after a site visit to the Rio Tinto copper mine in Andalucia, Spain.
He says the company is making “good progress” on achieving administrative standing by the third quarter of this year.
“The ministers at local government are just being put in place following the local elections – all parties involved are now supportive of the project and should be pushing this project forward towards a mine re-start incentivised by the current political and economic climate in Spain,” he added.
Meyer has a target price of 32 pence for the company, which is three times more than today’s share price of 9.65 pence.
Links:  Full news story
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