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Broker tips: St James's Place, Asos, Genuit

By Michele Maatouk

Date: Friday 19 May 2023

Broker tips: St James's Place, Asos, Genuit

(Sharecast News) - RBC Capital Markets upgraded its stance on St James's Place to 'outperform' from 'sector perform' on Friday and lifted the price target to 1,400p from 1,390p.
It said that STJ has the strongest distribution model in UK wealth, and following a de-rating, the shares now stand out as offering value.

"Organic growth remains strong in absolute and relative terms whilst market expectations for flows now look achievable," it said.

"The shares have typically tracked movements in the net cash result, where we expect double-digit growth.

"This growth, combined with an attractive dividend yield (4.9% FY23E), means the stock could deliver a mid-teens total shareholder return, by just maintaining the current (undemanding) P/E rating, but we also see potential for multiple expansion."

Citi upgraded online fashion retailer Asos to 'buy' from 'neutral' as it cut its price target to 600p from 780p.

"We believe its current liquidity is unsustainable post expiry of its revolving credit facility (Nov-24) without meaningful further cash preservation actions," Citi said.

"Specifically, we expect Asos to reduce capex (FY24e Capex: £122m versus FY23e £181m), continue to rationalise its Inventory position (FY24e Inventory -12% YoY), and further control central costs (FY24-26e Adj. EBIT margin circa 2-4%)."

As a result, Citi assume Asos' revolving credit facility of up to £220m to Nov-24 is extended beyond FY26, but with its associated interest rate remaining sizeable (circa14%).

"We meaningfully downgrade growth given current trading and cash preservation actions (FY23/24e Revenue -9%/-17% lower) and earnings (FY24/25e Adj. profit before tax -48%/-43% lower) as a result.

"The above, coupled with a higher WACC (+4.5pp to 15%), leads us to cut our target price to £6.0."

Berenberg lifted its price target on Genuit after the company upped its annual earnings expectations a day earlier.

In a statement on Thursday, Genuit said year-to-date trading was in line with expectations but, given progress on margins, management increased full-year guidance for adjusted EBIT to be "slightly ahead" of consensus.

"Ultimately, while end-markets remain tough, we view this statement as some initial evidence that the group is starting to deliver some of the targets talked about at its November 2022 capital markets day (CMD), specifically on cost, efficiency and margin delivery," Berenberg said.

"Shares responded well, up 14% on the day. As such, we increase our FY23 numbers by circa 4% and our price target to 400p, and retain our 'buy' rating."

Berenberg previously had a price target of 370p on the stock.


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