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Broker tips: Secure Trust, Crest Nicholson, Hargreaves Lansdown

By Iain Gilbert

Date: Friday 20 Jan 2023

Broker tips: Secure Trust, Crest Nicholson, Hargreaves Lansdown

(Sharecast News) - Analysts at Berenberg lowered their target price on retail and commercial bank Secure Trust from 1,820.0p to 1,420.0p on Friday as the group continues to navigate current conditions.
Berenberg said Secure Trust's recent quarterly results were broadly in line with its expectations, with the company delivering "strong loan growth" in 2022.

However, Berenberg, which reiterated its 'buy' rating on the stock, expects loan growth to slow in 2023 as it tightens credit criteria given the "uncertain economic outlook.

"We have revised our forecasts to account for the latest results, as well as the uncertain economic outlook. Our adjusted-EPS expectations have fallen c6% for FY 2022E and c21-23% for FY 2023E-24E. Outer-year forecasts have fallen, primarily due to reduced expectations for loan growth. We also increase our cost-of-risk expectations, from 1.3% to 1.4% for FY 2023E-24E," said Berenberg.

"To reflect changes to our forecasts, we have revised our price target from 1,820.0p to 1,420.0p per share. Our new price target implies a P/BV (FY 2023E) of 0.8x. Secure Trust's shares have fallen c47% on a one-year view and the company now trades on 0.4x P/BV (FY 2023E)."

UBS downgraded housebuilder Crest Nicholson to 'sell' from 'neutral' on Friday as it pointed to an unfavourable risk/reward scenario.

The Swiss bank said that following a strong run in the shares - up 18% above pre-mini budget levels versus the sector up 8% to 25% - it sees an unfavourable risk/reward.

"In a scenario where house prices materially decline Crest Nicholson appears the most at risk of land impairments given its lower margins (15% versus sector circa 20%)," UBS said.

"We also see execution risk in the geographic rollout: (1) capital deployment in new markets, (2) market timing and (3) increasing overheads (guided +10% for FY23)."

UBS, which reiterated its 210.0p target price on the stock, added that over the medium term, Crest's divisions are in areas where planning restrictions appear the most acute, which could constrain volume recovery and/or reduce intake margins on land approvals.

Analysts at Jefferies downgraded financial services group Hargreaves Lansdown from 'hold' to 'underperform' on Friday, stating rival Vanguard was rapidly approaching.

Jefferies said two things had changed since its January update on the UK wealth names in its coverage, with Vanguard announcing it had recruited more new customers than Hargreaves Lansdown and AJ Bell's direct-to-consumer platforms combined in 2022, the latter of which also warned of a quarterly slowdown in customer growth.

"With renewed doubt about HL's ability to replace or retain departing customers," said Jefferies, which stood by its 800.0p target price on the stock.

Jefferies highlighted that Hargreaves Lansdown faces "a structural problem" of its best clients being quite old and prone to leave the platform in search of advice.

"Our valuation is unchanged, but with 14% downside from the current price and another problem facing their defensive strategy, we downgrade HL/ to 'underperform; at an unchanged PT of £8. That equates to 14x our FY23e EPS, which is where it was at the start of last week vs consensus," concluded the analysts.


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