Broker tips: Admiral Group, Endeavour Mining

By Alexander Bueso

Date: Wednesday 16 Jun 2021

(Sharecast News) - Analysts at Credit Suisse reiterated their 'underperform' recommendation on shares of Admiral Group in anticipation of slower growth, new regulations and accelerating inflation.

The Swiss broker estimated Admiral's organic vehicle growth rate at 4.1%, forecasting that it would decline to 1% in 2021 due to its relative pricing differential and more flexible policies elsewhere.

Its traditionally lower non-shopper rate of 14.1%, versus rivals on 16.9% also left it more exposed to the upcoming FCA pricing guidelines due to a lower ability to retain clients.

Then there were the fast increases in used car prices which in April had reached a clip of 8.1%.

Lastly, and from a valuation viewpoint, the insurer's shares were trading on a 2021 price-to-earnings multiple of 20.4, which was 2.1 standard deviations greater than their five-year average.

Its shares were also trading on a PE premium of two times versus sector peer Direct Line, the broker said.

Credit Suisse also kept its 310.0p target price for the shares unchanged.

Barclays initiated coverage of gold producer Endeavour Mining at 'overweight' on Wednesday with a 2,350p price target.

The bank said the company's asset quality, returns on equity and balance sheet are among the best in its global precious metals coverage.

"Yet it is also one of the cheapest stocks on all metrics. That reflects perceived risks over its geographical exposure, propensity for M&A, mine lives, and reliance on refractory processing for part of its growth plans," it said.

"However, we argue these concerns are largely misplaced. Meanwhile, gold is one of the few inflation hedges not to have risen significantly."


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