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Broker tips: Electrocomponents, Sanne, Stagecoach

Mon, 12th Oct 2020 15:01

(Sharecast News) - Analysts at Berenberg hiked their target price on industrial and electronics products distributor Electrocomponents from 575.0p to 815.0p on Monday, highlighting the acceleration of some pre-existing trends.
Berenberg said Covid-19 was accelerating pre-existing trends across many industries and stated that online distribution was "no different".

The market share gain story that has been central to the Electrocomponents investment case over the past few years has gathered momentum, and we have seen that play out in the first six months of FY 2021," said Berenberg.

The German bank, which also reiterated its 'buy' rating on the stock, was of the opinion that Electrocomponents continued to be "well placed" to navigate the ongoing uncertainty for two key reasons.

Firstly, the analysts stated that large global distributors had the ability to "flex their distribution and supply footprint" and added that an online business model also offered "resilience" through the Covid-19 pandemic.

RBC Capital Markets upgraded alternative asset services firm Sanne to 'outperform' from 'sector perform' on Monday, lifting the price target to 730p from 600p.

RBC said that while it continues to forecast slightly slower organic growth in 2021, reflecting some impact on new business wins and the pace of onboarding, medium-term structural drivers in the alternatives segment are robust.

"We expect the trend in outsourcing, increased regulation, the growth in allocation to alternatives and the growth in assets under management to continue to drive high single digit organic growth rates.

"The bigger players should be in a position to take a disproportionate share, given the ability to add structures and services in multiple jurisdictions, as well as being able to invest in technology that potentially reduces cost to serve and provides a better customer experience."

The bank also said that cost issues at Sanne look to have been put to bed and the business looks in good shape to continue its strong organic profit growth trajectory "with M&A on top".

Analysts at Canaccord Genuity cut their target price on public transport operator Stagecoach from 85.0p to 62.0p on Monday as they made downgrades to assumptions for the firm's regional bus unit.

Canaccord said long-term prospects for local bus services in the UK remained attractive, given environmental concerns such as air quality and traffic congestion.

However, in the near term, Canaccord said the Covid-19 pandemic continued to have "a major impact" on its regional bus operations.

"With social distancing rules likely to remain in place for some time, and given the increase in regional infection spikes and lockdowns, we expect the recovery in demand to take quite some time," said the analysts, which added that economic weakness, rising unemployment and structural changes to demand for local transport may also further dampen the recovery.

But despite "the unprecedented challenges" posed by Covid-19, the Canadian bank still believes that Stagecoach is "attractively valued" at current levels and opted to retain its 'buy' rating on the stock.

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