Broker tips: DCC, Unite, Watches of Switzerland
By Iain Gilbert
Date: Wednesday 15 Jan 2025
(Sharecast News) - RBC Capital Markets upgraded sales, marketing and support services group DCC to 'outperform' from 'sector perform' on Wednesday and lifted the price target to 6,000p from 5,800p following recent weakness.
RBC downgraded the shares in early December after they hit 5,800p on the back of the company's announcement that it would focus on Energy but said that after recent weakness, it sees enough upside to move back to outperform.
The bank said that with many macroeconomic and geopolitical question marks across the market, it now sees DCC as "an attractive place to be", with catalysts ahead.
"In an uncertain world, DCC ticks several boxes. We see short-term trading as likely to be sound, expect a disposal of Healthcare hopefully in the next six months and expect further delivery of its Energy strategy, including M&A," it said. "Whilst Energy standalone is tough to value, the division is cleaner, has positive mix drivers, is higher return and has more favourable working capital dynamics."
Goldman Sachs initiated coverage on student accommodation landlord Unite Group on Wednesday with a 'buy' rating, citing strong fundamentals and an attractive valuation entry point.
"The key points of our thesis include: 1) well-positioned and high-quality portfolio; 2) favourable supply/demand dynamics within student housing market; and 3) value-accretive investment opportunities and supportive balance sheet," the bank said.
"Following significant underperformance over 12 months driven by rates and positioning, in our view, the shares now trade at an attractive 26% discount to FY25E NTA/share."
Deutsche Bank downgraded its stance on Watches of Switzerland to 'hold' from 'buy' on Wednesday as it said it was "time to pause".
The German bank, which lifted its price target on the stock to 510p from 490p, said that in the mid term, WOSG remains one of its most preferred growth stories.
"Whilst we won't argue for a return to Covid high multiples that saw WOSG trade above luxury brands themselves, we do believe this is best in class retail, acting as a strategic partner in a resilient luxury category," it said. "We see compelling mid-term opportunities for growth, most notably in the US, and we don't believe there is a meaningful risk to WOSG model from Rolex's acquisition of Bucherer."
DB noted that the stock is up 15% since its upgrade to 'buy' in September, largely driven by PE multiple expansion, now trading largely in-line with its 12x Cal-25 PE target.
"However, first-half results raised some questions for us on underlying profitability and the shape of growth, which together with our FY26e EPS estimates sitting circa 5% below consensus means we hold back on arguing for a further re-rating until visibility into the year ahead improves," it said.
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