Broker tips: Volution, CMC Markets, EasyJet

By Iain Gilbert

Date: Thursday 22 Jul 2021

Broker tips: Volution, CMC Markets, EasyJet

(Sharecast News) - Analysts at Liberum raised their target price on ventilation products supplier Volution from 377.0p to 520.0p on Thursday, citing ongoing momentum.
Liberum stated Volution had reported "strong trading" through the second half of the year, with revenue for the full year now projected to exceed £270.0m - around 7% better than it had expected.

The bank, which maintained its 'buy' rating on the stock, also pointed out that Volution had kept its margins at around 21% in the second half, which it thinks shows that the group has passed on cost pressures, such as rising input costs and higher inbound freight charges, and had also managed the challenge of materials availability.

Liberum added that Volution, a corporate client of the bank, expects to close the 2021 financial year with leverage of 1.0x, which gives it capacity to continue to pursue acquisitions.

Analysts at Canaccord Genuity hiked their target for CMC Markets from 326.0p to 463.0p but kept their recommendation at 'hold', telling clients that they spied both downside and upside risks to the outlook - although the two were "balanced".

Following a record 2021 financial year for client acquisition, there was the possibility that income per CFD client might decline in FY2022 by more than the 3% they had pencilled-in as market volatility and leverage restrictions in Australia take a bite out of the unit.

Canaccord also said that not only might the number of client acquisitions fall short of the 22,000 new traders it anticipated for 2022, churn might also outstrip forecasts.

On the other side of the equation, the Canadian bank said the percentage of gross client income retained was a "clear" source of upside risk as was the potential opportunity in UK wealth management, the latter both in the near- and medium-term.

Canaccord also highlighted the dividend yield on the firm's shares, which at 4.4% they deemed as being attractive.

Berenberg trimmed its target price for shares of EasyJet from 1,000.0p to 930.0p on Thursday and kept their recommendation at 'hold', arguing that the shares were "reasonably" priced given the risk of a cash call that could materially dilute investors.

The German bank stated visibility on a recovery demand was "low" with the Delta variant of Covid-19 posing a threat to the reopening trajectory and timeline.

Uncertainty around the carrier's capital structure centred on its leverage, which stood at approximately twice the broker's estimates for EasyJet's operating profits in FY 2023.

Its cost of gross debt meanwhile was at £4.4bn, which Berenberg noted was twice rival Ryanair's, adding to an already large fixed cost base.

As a result, Berenberg now expects management to de-lever via an equity raise, possibly making the most of share price strength if late-summer demand improves in order to cut leverage to a level that would facilitate the refinancing of EasyJet's £300.0m Covid-19 facility due in November.

On the company's topline, Berenberg noted the fact that EasyJet was dependant on a close-in booking curve because of the uncertainty around Covid-19 and restrictions.


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