Broker tips: LSE, Weir Group, Coca-Cola HBC

(ShareCast News) - Numis has reiterated a 'hold' rating at target price of 2,700p on the London Stock Exchange Group (LSE) ahead of its merger with Deutsche Boerse.The £21bn merger between the LSE and Germany's stock exchange was announced in mid-March and aims to generate cost synergies of €450m (£354m) and revenue synergies of at least €250m (£197m)."We believe a merger with Deutsche Boerse could create significant value for LSE shareholders if completed as expected," Numis said."But whilst we see the obvious benefits from such a merger (namely cost and revenue synergies), we remain mindful of the challenges that would need to be overcome for it to complete (competition authorities, regulatory concerns, national pride) and the long list of failed merger and acquisition deals within this sector."The UK and German governments have said they would block the deal if it was seen to hurt their domestic economies.Numis said while a deal would be difficult to tie up, it estimated LSE could be worth up to 3,200p per share if the merger completes as expected and the targeted cost synergies are achieved."However, we still maintain our 'hold' recommendation and 2,700p/share target price as we remain mindful of the numerous challenges that need to be overcome for such a deal to complete."The broker added that it continues to favour LSE's "strong market position, favourable growth drivers and diversified revenue base" but the shares have had a "very strong run and are up with events in our view, especially given the downside risks should a deal not eventually be completed". Weir Group shares gained on Tuesday after Canaccord Genuity raised its rating on the stock to 'hold' from 'sell' and its target price to 1,200p from 800p.Canaccord said given the rally in Weir's US peers, it believes the valuation for the UK oil and gas-focused engineering company is "likely to stay extended even if the fundamental case is difficult to see"."The stock has in any case almost always traded at a premium to European oil services peers, in part because of its greater flexibility through downturns."The analyst said Weir has a long track record of cash generation through good and bad times so it is hard to argue that the company should trade at a large discount to its peers in North America which are showing a notable increase in share prices. Schlumberger, Halliburton and National Oilwell Varco are among the US peers.However, Canaccord said Weir is 25% exposed to the oil and gas sector, which has suffered a slump in crude prices amid a global supply glut."We continue to believe that fundamental over-capacity issues are likely to cap any recovery in pricing for the oil and gas supply chain for an extended period, even if volume recovers: and the capital expenditure outlook for the diversified majors in the sector strongly suggests there remains some way to go before this inventory is worked through." Credit Suisse bumped up its target price on shares of Coca Cola HBC following what it described as an "upbeat" investor seminar from the company on the previous day.The bottling company outlined plans for revenues to grow by between 4% to 5% over fiscal year 2016 to 2020 and boost its margins from the 7.5% achieved in 2015 back to their levels from before the crisis, at 11%.Analysts Sanjeet Aujla, Charlie Mills and Pavan Daswan estimated the improvement in margins would be more backend-loaded, towards 2018-2020, reaching 10% by fiscal year 2020. The analysts also called attention to the "inherent volatility" of the company´s markets.If CCH met those targets then on the basis of current exchange rates that could translate into a compound annual growth rate of 15% in earnings per share between 2016 and 2020, they said.That led Credit Suisse to lift its target price on the company´s shares from 1,480p to 1,500p, while keeping its recommendation at 'neutral'.The Swiss broker also pointed out the prospect for better pricing in Russia, easing deflation across Europe and the "good work" carried out by management on its cost base, which should allow for greater operational leverage if momentum on the top line was maintained.Lastly, the analysts noted how in the absence of future M&A opportunities the company would 'optimise' its balance sheet by paying out a special dividend.