Broker tips: Warpaint, Schroders, Braemar, Morgan Sindall
By Iain Gilbert
Date: Friday 01 Nov 2024
(Sharecast News) - RBC Capital Markets initiated coverage of Warpaint on Friday with an 'outperform' rating and 685.0p price target.
It said Warpaint presents a strong value proposition to customers by leveraging its dupe strategy to drive sales across its own-brand cosmetics lines, W7 and Technic.
"With many households facing tighter budget constraints, the popularity of quality dupe brands has been on the rise, supporting Warpaint's rapid sales growth of 20% CAGR to 2023," it said.
RBC noted that Warpaint has grown 17% more than the weighted mass colour cosmetics market since 2014.
"With strong retail partners on board in the UK/US/EU, we believe it can continue growing at circa 13% compound annual growth rate through 2026E, ahead of the market at circa 6% CAGR," RBC said.
"As a debt-free, cashflow positive business with superior operating margins (more than 20%), we initiate at outperform with a 685p price target, which reflects around 17x 2025E EV/EBITDA."
BNP Paribas Exane upgraded Schroders on Friday to 'outperform' from 'neutral' ahead of third-quarter results next week, as it pointed to improving momentum and an attractive valuation.
"We see these results as a potential strong positive catalyst for the stock where the company will outline positive flows in Q3 and beyond and positive fund performance momentum," it said.
"We also expect some strategic repositioning of the company which could include a cost savings program.
Finally, BNP added that it sees a better outlook for Schroders' wealth and alternative businesses as deal activity rebounds.
Analysts at Canaccord Genuity lowered their target price on shipbroking services business Braemar from 410.0p to 380.0p on Friday following the recently announced increase to the UK Employers National Insurance rate.
Canaccord Genuity stated that based on previous precedent, accrued bonuses at FY25 will be paid in the new tax year and estimates that an extra 1.2% on end FY24 accruals will deliver a £300,000 adverse impact.
Additionally, Canaccord also calculated a further £150,00 adverse impact for FY25 on share-based remuneration. On a full-year basis, the analysts see a £750,000-800,000 in FY26.
"We have thus reduced our forecasts and target price as a result. With interim results due on 6 November 2024, we think this will provide more on the trading outlook for the company," said the Canadian bank.
"We think Braemar shares offer: 1) scope for sector multiple expansion from a potential (non-linear) super-cycle emerging in shipping (rising demand, too few new ships); 2) multiple restoration and thus expansion as new management shows its capabilities; and 3) potential for significant upside from targeted expansionary investment - where the impact on Braemar can be significant."
Berenberg started coverage of Morgan Sindall on Friday with a 'buy' rating and a 4,500.0p price target.
It noted that the FTSE 250 contracting business was primarily exposed to the UK construction, infrastructure, fit-out and urban regeneration markets.
"The business operates a decentralised model and is conservatively run by a highly-regarded management team, with interests across a diverse range of contracting markets," it said.
It said that strong operational delivery in recent years has driven an "exceptionally" strong run in the shares, including a 15% increase following the recent trading update on 22 October.
Berenberg said: "As such, we think that the principal debates regarding the stock will shift to: 1) the extent to which the short-term acceleration in performance can be sustained into the medium term; 2) the moving parts within the Partnership Housing and Mixed Use Partnerships divisions, which could become the key growth drivers of the business in the next five years; and 3) the optimal allocation of capital for the group, considering its large - and growing - net-cash position."
The bank said Morgan Sindall was well positioned to meet these challenges,.
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