Broker tips: Primary Health Properties, Sage, Next
By Iain Gilbert
Date: Friday 09 May 2025
(Sharecast News) - Shore Capital has kept a 'buy' rating on healthcare real estate firm Primary Health Properties, saying the company is "still in the mix" over the bidding war for Assura and remains the preferable alternative to the latest offer from KKR and Stonepeak.
Assura announced on 9 April that it had reached an agreement with KKR and Stonepeak (together, Sana Bidco) over a 49.4p-a-share cash offer, after rejecting a cash-and-shares offer from PHP equivalent to 46.2p. The company then had to extend the deadline for the posting of a scheme document until 21 May.
However, Shore Capital hailed the synergy benefits from a potential PHP-Assura merger, comprising operational cost efficiencies and the benefits of scale in sourcing services and financing, as well as placing the combined group in good stead amid NHS reforms and accelerating rental growth.
Meanwhile, the shares element of PHP's offer represents "significant value upside" for Assura shareholders if they stay invested - especially given a predicted re-rating of the sector as interest rates fall further.
"[PHP's] offer has improved materially since announced in April following an appreciation of the PHP share price and is now worth 48.1p per Assura share - before synergy benefits and the re-rating potential," Shore Capital said.
"We believe shareholders should support the merger which would create a new powerhouse in a sector with attractive long-term growth prospects while also retaining domestic ownership of critical UK infrastructure. The merger would create the UK's largest healthcare REIT bringing together highly complementary primary care property portfolios, both focused on modern, long-term leased NHS-anchored facilities."
Citi has reiterated a 'buy' rating for enterprise software giant Sage ahead of its interim results next week, saying that the company's "drivers of resilience" were solid despite an uncertain macro environment.
Ahead of the results, Citi analyst Balajee Tirupati said the market's focus will be on customer demand and behaviour amid tough conditions, with many concerned about Sage's exposure to the small and medium-sized business (SMB) and non-profit markets in the US.
"Against this we expect a more stable business evolution with a broadly in line quarter (slight moderation in growth, better margins). Recent readthrough for SMB and back-office software space (US) appears steady, while other drivers in price increases and product expansion (regional & functionalities) remain intact," Tirupati said.
The analyst expects Sage's management to reiterate full-year guidance for growth and margins - though increased deal scrutiny by customers is possible if uncertainty persists.
"We see Sage as relatively insulated and maintain 'buy' on GARP appeal," Tirupati said.
Analysts at Berenberg hiked their target price on retailer Next from 13,400.0p to 14,700.0p on Friday, citing upside risks to its Q2 estimates.
Berenberg said Next's Q126 trading statement on 8 May brought the second upgrade to adjusted pre-tax profit guidance this year, on the back of four upgrades in each of the past two years. In its view, this "positive momentum" reflects the changing profile of Next and some growth angles that have emerged recently - as opposed to a time-limited self-help recovery, which was "more typical" for legacy retailers.
The German bank noted that Next's 1.3% adjusted pre-tax profit guidance upgrade for FY26E took into account the better performance than it had anticipated in Q1, but said it added nothing beyond its previous guidance for the remainder of the year.
"We see upside risk to our Q2 estimate of 4.9% total full-priced sales growth and to company guidance. Prior-year comparatives do not become more demanding until Q3," said Berenberg, which has a 'buy' rating on the stock.
"Our profit estimates are raised by 1-2% through the DCF, but we also now incorporate a 10% premium for management and the quality and defence profile of Next."
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