Broker tips: Segro, Sage, CMC Markets

(Sharecast News) - Citi upgraded Segro on Monday to 'buy' from 'neutral', saying it estimates that as rates decline, the risk to its previous estimates of deep recession rent declines reverses and it now expects growth.

"Combined with lower debt and bond yield forecasts, our estimates of a circa 20% decline in asset value reverses to circa 15% growth, significantly increasing our forward net asset value estimates," the bank said.

"Downside risk in the real estate sector has eased but has not been eliminated so our upgrade of Segro is a cautions way to increase investment risk in the real estate sector, while offering downside protection should conditions deteriorate back towards our deeper recession view."

Barclays downgraded Sage Group to 'underweight' from 'equalweight' and cut the price target to 985p from 1,050p.

The bank said annualised recurring revenue (ARR) growth and the pace of margin expansion peaking, combined with an elevated valuation, "all suggest it's as good as it gets for Sage shares".

"With NCA growth slowing and risks to NRR from the macro backdrop, we see better value elsewhere," Barclays said.

Elsewhere, RBC Capital Markets said it sees further upside at CMC Markets despite a near-50% jump in the stock over the past two months following a positive trading update from the online trading company.

The share price hit a yearly low of 86.9p in late November, after the company reported it swung to a loss before tax of £2m in its first half ended 30 September, while net operating income slumped 20% to £122.6m.

However, in a trading update two weeks ago, CMC said improved market conditions means it is now targeting a full-year net operating income of £290-310m, up from previous guidance of £250-280m.

The broker lifted its target price for the shares from 140p to p150p, keeping an 'outperform' rating, after lifting its earnings per share estimates for the current year by a whopping 219% to 7.85p. RBC is now forecasting a full-year pre-tax profit of £30.1m, up from an earlier forecast of £10.4m.

RBC kept its estimates for the next two years relatively unchanged and it noted "upside risk in the event of bouts of higher volatility, with elections in 2024 in the US and UK providing potential opportunities".

"Whilst outer year forecasts are unchanged our confidence in profit progression is also increased, given conservative growth forecasts, and as we await further details about potential cost efficiencies from FY25 onwards," RBC said.

"CMC shares have made a strong start to 2024 YTD (up 27% in total shareholder return terms), but the current valuation still screens as relatively undemanding when surplus capital is factored in."