Broker tips: Coats Group, Ecora Resources
By Iain Gilbert
Date: Thursday 05 Sep 2024
(Sharecast News) - Analysts at Berenberg raised their target price on thread and structural components' manufacturer Coats Group from 120.0p to 135.0p on Thursday after the group announced that its UK pension scheme was now fully de-risked, a long-awaited catalyst for the stock.
Berenberg stated that from its perspective, it seems that Coats has now fully hedged against all financial and demographic risks related to its legacy pension position, with the de-risking expected to cost between $90.0m-128.0m and make the temporary switch-off of annual scheme contributions from January 2024 permanent - a three- to four-year payback period in substance.
"Importantly, this milestone removes any lingering uncertainty and volatility in the equity story and leaves the group comfortably positioned (we forecast leverage of 1.6x at the end of FY 2024) and with a stronger FCF profile for the future," said the German bank, which reiterated its 'buy' rating on the stock.
Meanwhile, Berenberg noted that underlying trading "appears comfortable", and said it would expect end markets to continue to recover.
"On the premise of a de-risked investment case, improvements to FCF generation and strong underlying trading, we raise our price target to 135.0p (from 120.0p), which would put the shares on a reasonable 17x FY 2025 P/E and a 5% FCF yield."
RBC Capital Markets raised its target price on royalty and streaming company Ecora Resources from 100.0p to 120.0p on Thursday following the group's results call a day earlier.
The Canadian bank removed $83.0m in investments from its 2024/25 forecasts to reflect management comments on the results call regarding Ecor's Incoa project and the unlikely near-term execution of the Piaui option given current market conditions.
"This reduces our net debt and acquisition costs," said RBC. "We continue to see ECOR as a compelling investment opportunity and expect a re-rating to occur as coal exposure fades and development projects are commissioned."
Reporting by Iain Gilbert at Sharecast.com
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