Broker tips: Weir, Eleco, Telecom Plus
By Iain Gilbert
Date: Thursday 08 May 2025
(Sharecast News) - Weir Group shot higher on Thursday after UBS upgraded the shares to 'buy' from 'neutral' and hiked its price target on the stock to 2,850.0p from 2,250.0p.
UBS said its new 'buy' thesis was driven mostly by its view that there was significant upside to the savings that Weir can achieve from its Performance Excellence plan.
"However, we also think Weir is the best protected amongst peers in the event of a downturn following recent tariffs," it added.
UBS noted that Weir has built up a track record for underpromising and overdelivering and pointed out that since the Performance Excellence programme was announced in September 2022, cost savings guidance has been increased twice - from its initial target of £30.0m to £60.0m in 2023 and £80.0m in 2024.
Using bottom-up analysis, UBS estimated that Weir can generate £125m of savings from its Performance Excellence programme versus guidance of £80.0m by the end of 2026, with the additional £45.0m equivalent to an incremental +1.6% adjusted EBITA margin in 2026.
"What's driving our above guidance estimates? We have performed bottom up analysis on Weir's cost savings programme to formulate a total savings estimate," said UBS. "The key sources of difference versus guidance come from 1) Weir Business Services, where we estimate that Weir can deliver £55m savings versus guidance of £20m, and 2) £40m of savings from capacity optimisation versus guidance of £30m."
The Swiss bank added that overall, it thinks the impact from US tariffs will potentially be limited, noting that even in a worst-case scenario, it calculates that Weir's "idiosyncratic cost savings programme" was likely large enough for it to deliver consensus earnings in 2026.
Analysts at Canaccord Genuity initiated coverage on Eleco with a 'buy' rating and 176.0p target price on Thursday as it wondered if the firm was poised to become "the next UK SaaS champion".
Canaccord Genuit said Eleco has "all the hallmarks of the next UK SaaS champion", in its view, noting that the group has "best-of-breed software" facing an industry that requires, and was being pushed towards, digitalisation.
"Digital transformation has historically been slow in the construction sector with industry reports estimating that circa 85% of constructors still use Excel, and that pen and paper (rather than digital tools) are used on circa 25% of job sites," said Canaccord, which noted that Eleco was exiting a more than three-year software-as-a-service transition with product-market fit across its suite of digital transformation solutions.
The Canadian bank pointed out that Eleco already counts more than 90% of the UK's top 100 construction contractors, 40 of the top 50 in Sweden, and 14 of the top 20 in Germany as customers, and said recent product development aimed at improving productivity and bridging the site/office divide could provide "a material upsell opportunity".
"Eleco's transformation has gone under the radar as the SaaS transition has resulted in group's revenue increasing 18% from FY21-24, but recurring revenue has increased 62% over the same period. Eleco reported a 19% FCF margin pre-SaaS transition and, in our view, has the potential to be at least a double-digit grower, implying strong 'Rule of 40' credentials. We view the current 2.6x FY25 EV/Sales multiple as too low for a potential 'Rule of 40' SaaS stock," concluded Canaccord.
Berenberg initiated coverage of Telecom Plus on Thursday with a 'buy' rating and 2,600p price target as it argued it was a "gem" that has "fallen through the cracks".
The German bank noted that through its Utility Warehouse brand, Telecom Plus offers a range of energy, broadband, mobile, insurance and cashback card services to UK households and small businesses.
"Customers can bundle multiple services together, creating a convenient multi-service offering that can achieve the best savings in the market, while also providing TEP with high value, long-term customers," Berenberg said. "TEP has successfully grown the business through multiple macro environments and cycles to over 1.1m customers and today is the seventh-largest energy provider in the UK and the largest UK energy provider to have acquired all of its customers organically.
However, in its view, Berenberg said "this unique business" was flying under many investors' radars.
Berenberg said its lack of peers means that Telecom Plus was often incorrectly positioned and valued against other utility providers with much lower growth and return profiles.
"This creates an attractive proposal for investors: a predictable and highly cash-generative/high-return (over 30% ROCE) business with circa 10-15% customer growth per annum, trading in the wrong bucket."
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