Broker tips: National Grid, Judges Scientific, Bango, Spirax
By Iain Gilbert
Date: Monday 20 Jan 2025
(Sharecast News) - Citi upgraded National Grid to 'buy' from 'neutral' on Monday following a period of share price underperformance, mostly driven by macro factors and flows.
"As we highlighted when we downgraded NG to neutral, we continue to like the company's RAV and earnings growth profile, which is largely underpinned by investments with political and regulatory support, and that we would have no hesitation to step back into the shares should there be any unjustified sell-off given these strong fundamentals," the bank said.
"We are now stepping back in. In our view, the political and regulatory support remain robust as we head into RIIO ET3, as is NG's balance sheet."
In addition, Citi said that a combination of strong USD, re-rating of US regulated assets and Citi's house-view of second-hal interest rate cuts provide an attractive proposition for investors.
Analysts at Berenberg lowered the target price on scientific instruments business Judges Scientific from 11,310.0p to 10,600.0p on Monday, citing "greater clarity" following the group's FY24 trading update.
Berenberg said Judges' update had confirmed that earnings per share were expected to be in line with current market expectations of 276.8p - within management's downgraded guidance range following its profit warning in November, albeit at the lower end.
The German bank also stated the update provided it with greater clarity on its H125 outlook, and with some signs of improving end markets, said it remains "optimistic" about the year ahead.
"The normalisation of scientific instrument end-markets, especially in China, and for higher-complexity tools, while painful, should be temporary. In FY25, we think that Judges is well positioned to return to growth and we expect a good performance in H1 2025. We expect the delivery of slipped projects (including the delivery of a sizable Geotek contract), alongside a broader end-market recovery, to contribute to stronger results versus the soft comparable period," said Berenberg.
The analysts noted that Judges' shares currently trade on 14.5x FY 2025 enterprise value/underlying earnings - roughly 15% below its 10-year average, which it reckons may make for "an attractive entry point".
Canaccord Genuity initiated coverage on sales and marketing technology group Bango with a 'buy' rating and a 244.0p per share target price on Monday.
Canaccord Genuity stated Bango was primed to exit a busy two-year period with its DCB business potentially worth more than the company's market cap and a "fast-growing platform business" with SaaS-like licensing, first-mover advantage and a roughly $100.0m annual recurring revenue opportunity.
"Bango's heritage is in alternative payments, with the group currently deriving the majority of revenues from direct carrier billing. DCB is popular in mobile-first markets (e.g. Japan, South Korea) and countries where card payment penetration is low as it allows consumers to pay using their mobile phone bill," said the Canaccord.
The Canadian bank also noted that the acquisition of rival DOCOMO Digital in 2022 had scaled the network but also added roughly $21.0m of excess integration costs that have distorted Bango's profit and loss story. However, with the synergies now largely complete, Canaccord reckons "a high-margin, highly cash-generative DCB business" could emerge with approximately 50% or more EBITDA margins, which it estimates to be worth more than Bango's current market cap.
"We believe Bango is primed to exit a period of integration/investment with double-digit organic revenue growth and strong margin, EPS and FCF recoveries expected," concluded Canaccord.
Jefferies has upgraded its rating for Spirax as part of its annual review of the listed UK industrials sector.
Jefferies said that the backdrop for the sector in 2024 was "mixed", with a highly anticipated recovery in the second half failing to emerge. Meanwhile, 2025 doesn't look a whole lot better, with "limited positive momentum and plenty of uncertainty".
"But we we are cautiously optimistic (more so than 12 months ago) that there will be improvement as the year progresses, PMI/IP improves, and interest rates move lower," the broker said.
"In the near-term, there are a number of attractive end markets, but inflation/interest rates/bond yields remain stubbornly high. Balance sheets are strong (36% of our universe is buying back its stock, and this will likely rise in 2025F) and valuations are generally appealing."
As for Spirax Group, the stock is now rated 'buy', up from 'hold' previously, after sentiment had turned too negative on the business. "While a number of the group's recent issues are not yet fully resolved, the group is through the worst and can recover nicely over the next two-three years," the broker said.
Email this article to a friend
or share it with one of these popular networks:
You are here: news
10 Lower Thames St,
London EC3R 6EN