Broker tips: Aveva, Entain, Fresnillo

Jefferies upgraded its stance on shares of Aveva on Thursday to 'buy' from 'hold' and hiked the price target to 4,500.0p from 4,000.0p.

It said that with the near-finalised acquisition of OSIsoft, it has a large opportunity to convert an enlarged customer base to a financially accretive subscription model.

"OSIsoft's product portfolio is complimentary to Aveva’s, enabling greater up- and cross-sell to customers," Jefferies said.

Jefferies said that post-merger, Aveva’s oil & gas vertical exposure will decrease from around 40% to 35% of revenue. "Importantly, the mix shift will also increasingly skew towards more mid- & downstream exposure, which is likely less volatile than upstream exploration," it said.

The bank also highlighted an attractive valuation, pointing out that post-merger, Aveva is trading as one of the cheapest companies in the engineering software group at 9.3x EV/FY22 and 8.6x EV/FY23 revenue, compared to the peer group trading at 12.9x and 11.6x.

Barclays upgraded its stance on Ladbrokes owner Entain to 'overweight' from 'equal-weight' on Thursday, lifting the price target to 1,600.0p from 1,500.0p as it said the company's joint venture with US casino operator MGM Resorts, BetMGM, was undervalued.

The bank said that having performed a detailed analysis of the US sports betting and i-gaming market, it considers BetMGM to be "materially undervalued".

"We think BetMGM will be a top-four player in the US market long term (circa 17% market share), and we value it at £5.0 per Entain share versus £1.70 implied at today's price," it said.

"While the MGM bid has dissolved, we expect speculation to return and a bid premium should underpin the shares," said Barclays, adding that while UK regulation was a concern, US upside will trump UK regulatory risk.

Analysts at Berenberg cut their target price on mining outfit Fresnillo to 1,000.0p from 1,200.0p on Thursday following some disappointing guidance.

Berenberg acknowledged that Fresnillo, which operates a portfolio of precious metals mines in Mexico, had announced fourth-quarter silver production of 12.95m ounces and gold production of 215,000 ounces, taking 2020 production to 53.0m ounces of silver and 769,000 ounces of gold and beating expectation and guidance for gold on a stronger end to the year at its Herradura asset.

However, the German bank said disappointing guidance for 2021, with attributable silver production of 53.5-59.5m ounces, as a result of Covid-19 impacts on the ramp-up of its new Juanicipio mine caused it to trim 2021 expectations to 714,500 ounces of gold and 55.5m ounces of silver.

Berenberg also stood by its 'hold' rating on the stock