Broker tips: Bridgepoint, Elementis, IAG, EasyJet
By Iain Gilbert
Date: Wednesday 30 Oct 2024
(Sharecast News) - Citi downgraded its stance on alternative asset fund management group Bridgepoint on Wednesday to 'neutral' as it said there were limited near-term catalysts after the shares have risen 80% over the past year.
The bank said it was constructive on Bridgepoint's medium-term growth prospects and sees notable upside to consensus earnings from FY26E.
However, a lack of near-term growth and/or catalysts and a need to demonstrate cost control and raising SMAs mean it sees less pressing need for investors to buy the shares.
"The recent decisions to stop the SBB (following rerating) and sell previously locked-up shares at an 11% discount within a relatively short period were also weak signals, in our view," Citi said. "After the capital markets day we increase our target price to £3.50 but downgrade rating to neutral."
Citi said it believes the shares could become more attractive as we progress through the next fundraising cycle and approach BE VIII activation, which is expected mid-FY26.
Analysts at Berenberg lowered their target price on specialty chemicals business Elementis from 190.0p to 170.0p on Wednesday after the group's Q3 results a day earlier.
Berenberg stated that despite "a stalled recovery" for the industrial chemicals sector in H2, Elementis' qualitative trading update was "in line with investor expectations", with these having already been raised at the half-year.
The German bank, which has a 'buy' rating on the stock, noted that a ruling from the Court of Justice of the European Union in a long-running tax dispute related to state aid went in Elementis' favour.
However, Berenberg also said that the most important factor for the stock price in the last few weeks has been concern over the status of talc, and this has not become clearer.
"The main reason is the recommendation in September from the Risk Assessment Committee of the European Chemicals Agency to classify talc as a 1B carcinogen. This would categorise the substance as having carcinogenic potential that is presumed, often based on animal data. We suspect that most investors aware of the review had been anticipating a less severe Category 2 classification," said Berenberg.
"The EU Commission is expected to make a decision on this topic by Q1 2026, after which a grace period for existing producers would apply. The industry body (Eurotalc) is likely to appeal. In essence, we think that the status quo is, from a legal perspective, likely to persist for most of the 2020s, even under a 1B classification."
Jefferies initiated coverage on a raft of European airline stocks on Wednesday as it argued that the market was overstating the risks by pricing in 20-60% downgrades in 2026.
"The sector does face a challenging period as carbon headwinds enter the P&L and yield expansion is uncertain," Jefferies said. "However, the market fails to recognise self-help measures and efficiency gains. Our flight plan favours exposure to new generation fleet delivery, non-flight revenue streams and turnaround opportunities."
It started coverage of British Airways and Iberia owner IAG and easyJet at 'buy' with price targets of 270.0p and 680.0p, respectively.
As far as IAG was concerned, Jefferies pointed to the re-rating and earnings opportunity, while on easyJet, it also pointed to a re-rating opportunity, saying the budget airline should benefit from its growing package holiday business, fleet renewal and self-help opportunities through optimising winter trading and ancillaries.
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