Broker tips: Hammerson, Marshalls, Warpaint London
By Iain Gilbert
Date: Wednesday 18 Sep 2024
(Sharecast News) - Citi upgraded Hammerson to 'buy' from 'neutral' on Wednesday and lifted the price target to 43.0p from 26.0p, saying it was entering a "new positive up cycle".
The bank said that having sold its low-yielding value retail business, Hammerson can "finally look forward to growth" at a time when shopping centre asset values and rents will likely grow from a low-base as a new positive real estate cycle emerges.
The analysts increased their price target and revised their estimates to reflect higher net asset value and earnings per share, and "with around 48% expected total return we upgrade to buy".
Citi also noted the shares trade at a significant discount versus past growth cycles.
"Applying historical growth cycle multiples to our estimates suggests a valuation corridor of 43.6p to 76.1p, offering upside potential to support our buy rating," it said
RBC Capital Markets initiated coverage of Marshalls on Wednesday with a 'sector perform' rating and 370p price target.
It noted that Marshalls outperformed the FTSE 250 by 10x and traded at 18x average price-to-earnings, a premium of around 40% to peers from 2013 to 2021, and said earnings per share and return on capital employed increased by around 3x.
"Enter Marley, a transformational deal which coincided with a cyclical downturn in 2022. 2024e adjusted EPS is over 50% below 'normalised' levels," it said. Marshalls bought pitched roof tile specialist Marley Group for £535.0m.
"Prior CEO Martyn Coffey departed and now we await a new midterm strategy. We think a pathway back towards pre-Marley ROCE and above market earnings growth is needed to justify prior valuation levels. Marshalls' premium remains in-tact despite lower adjusted EPS growth and ROCE."
Analysts at Berenberg hiked their target price on cosmetics group Warpaint London from 580.0p to 680.0p on Wednesday after the company delivered "significant" end-market outperformance and margin expansion in its interim report card.
Berenberg believes the strength of Warpaint's gross margin was the main feature of its H124 results, which it expects to drive upgrades to consensus.
"We see a considerable runway for further revenue growth and anticipate incremental margin expansion beyond the 334 basis point year-on-year that it delivered in H124," said the German bank.
"Our view of the sustainability of Warpaint's revenue growth is predicated on the further expansion of its store presence within its existing customer base - in which, we think Warpaint is significantly underpenetrated."
Berenberg, which reiterated its 'buy' rating on the stock, added that Warpaint currently trades on a 21.7x 12-month forward price-to-earnings ratio - one-half standard deviation above its long-run historical average.
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