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Broker tips: Victrex, Great Portland

By Iain Gilbert

Date: Thursday 13 Jun 2024

Broker tips: Victrex, Great Portland

(Sharecast News) - Analysts at Berenberg lowered their target price on high performance polymers business Victrex from 1,680.0p to 1,491.0p on Thursday, stating the group was "not out of the woods yet".
Berenberg, which has a 'hold' rating on the stock, said Victrex's H124 results in brought with them guidance that translated into no profit growth in FY24 despite a better H2 than H1.

The German bank said Victrex was "paying the price" of longer-than-expected de-stocking in medical, the slow ramp-up of its new plant in China, and a prolonged impact from lower asset utilisation.

On a positive note, Berenberg pointed out that volumes have finally started to show some signs of stabilisation, with Q2 sales volumes, at 989 tonnes, down by only 1% year-on-year and up by 31% sequentially from Q1.

However, Berenberg noted that although the recovery in some key end-markets may have started, it said management's track record of "overoptimistic assumptions and questionable execution" will continue to weigh on the shares for quite some time.

"We reduce our FY 2024 estimates sharply on the back of the poor H1 results. Our adjusted PBT is now 67.4m. Our reported EBIT is affected by the recent impairment of 20.1m on the Bond 3D investments. We value Victrex using a mix of DCF and multiples," concluded Berenberg.

Jefferies has upgraded its rating for real estate group Great Portland from 'underperform' to 'hold' in the aftermath of the company's 350.0m rights issue.

The reason for the three-for-five rights issue of 152.0m shares at 230.0p is to purchase special opportunities in Great Portland's core areas of headquarters and flexible office space focused in London's West End markets.

"We have updated our forecast assuming the proceeds are held on high yield deposit accounts and then deployed over FY25 and FY26 with a total acquisition target of 600.0m of deep value buildings below replacement costs already identified," said Jefferies in a research note.

The broker said it "recognises that the business is now better positioned with stronger financial ratios and that the management has a successful track record of flexing its equity base by returning surplus capital and then issuing equity to successfully pursue value add opportunities and not relying on blanket market repricing."

Jefferies cut its target price for the shares from 310.0p to 300.0p, which still suggests some downside to current prices.


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