Broker tips: Aviva, Diploma, JTC, Greatland Gold
By Iain Gilbert
Date: Wednesday 22 Jan 2025
(Sharecast News) - JPMorgan Cazenove upgraded Aviva on Wednesday to 'overweight' from 'neutral' and lifted the price target to 615p from 555p as it assessed the valuation upside from the Direct Line acquisition.
"We think this deal is likely to be approved by DLG shareholders due to the attractive valuation offered and is unlikely to cause regulatory concerns due to the competitive nature of the UK personal lines market," JPM said. "We expect the deal to be positive and upgrade Aviva to OW."
JPM said the deal is strongly accretive, moves Aviva to a higher-multiple non-life insurance mix and improves its scale in UK P&C.
"Beyond our forecasts there is huge scope for revenue synergies, given Aviva will be the second largest financial services brand in the UK with an established ability to cross-sell," it said.
JPM lifted it earnings per share estimates by around 10-12% over 27E-28E and noted "huge" upside to consensus EPS.
It pointed out that Aviva trades at circa 8.3x estimated 2026 price-to-earnings, versus UK life peers at around 9x and European composites on circa 10x.
"If the deal does not go through, this may be taken negatively initially but it would leave Aviva in a position to deploy surplus capital elsewhere or increase capital return to offset this," JPM said.
Berenberg has highlighted is key picks in the UK-listed industrials sector for 2025, saying it continues to favour "quality compounders" and cyclical stocks with good exposure to a recovery in end-markets.
The outlook for the sector is still largely uncertain after a mixed 2024, Berenberg said, with elevated interest rates likely to hamper a global cyclical industrial recovery.
"Destocking continues to play out yet has eased further, PMIs remain negative, rates remain stubbornly high. Yet there are now diverging regional outlooks, and among the challenges there are signs of encouragement," the broker said.
The US is its preferred region, with Trump's pro-growth and protectional policies likely to benefit industrial companies domestically, while Europe and China remain challenging and the UK appears "stable, if anaemic".
"We think it too early to go fully cyclical, at least in H1 2025; however, we think the right approach is to have some cyclicality. Equally, we continue to favour quality compounders, or where value creation or special situation events offer asymmetric returns."
Berenberg named compounders - companies that can deliver sustainable, long-term growth with recurring revenues - like Diploma and JTC, "both of which have long-term track records of organic and inorganic outperformance and double-digit EPS growth".
Analysts at Canaccord Genuity slightly raised their target price on exploration and development firm Greatland Gold from 17.0p to 19.0p on Tuesday as it updated its model on the stock following its December production figures.
Greatland Gold released its maiden production report since closing the acquisition of the Telfer mine and the 70% of Havieron that it did not already own, with gold production "significantly" beating its expectations of 915 tonnes at 1,189 tonnes. Copper production also beat expectations, as did the firm's closing cash balance of AUD $145.0m (£73.74m).
While Greatland has not yet provided guidance for FY25, Canaccord noted the derisked nature of the mine plan as the company has reported approximately 11.0m tonnes of run of mine stockpiles at 0.71 grams per tonne of gold, in addition to a further 25.0m tonnes of low-grade stockpiles.
The Canadian bank expects Telfer to produce roughly 336,000 ounces of payable production over the initial 15-month mine plan as lower-grade material moderates the strong run rate seen in December 2024.
"The report should allay most fears around the ramp-up of the plant (which we estimate is operating ahead of plan at 54 ktpd v 48 ktpd in the technical report) and affirm that the balance sheet remains in a strong position. We estimate that GGP trades at 0.32x (peer avg 0.7-0.8x), and we continue to see this period as an attractive entry point ahead of the potentially catalyst-rich calendar in CY25," said Canaccord, which has a 'speculative buy' rating on the stock.
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