Broker tips: Asos, Tate & Lyle

Analysts at Berenberg raised their target price on retailer Asos from 6,500.0p to 6,800.0p on Tuesday following its acquisition of the Topshop, Topman, Miss Selfridge and HIIT brands a day earlier.

Berenberg believes the deal makes "good strategic sense" for Asos, with the acquired brands all having "very strong" awareness among the firm's target customer group, making the acquisition a "match made in heaven" and also meant the company could more than treble the number of SKUs from the acquired brands on its platform.

The German bank noted that Asos trades on just 25x 2022 earnings per share, which with the exception of the early stages of the pandemic was its lowest multiple since 2011, and also pointed out that risk was to the upside of its top-line guidance given the potential for the transfer of sales from the store estate and its strong cash generation, which should provide it with a solid war chest if any further attractive opportunities were to arise in the coming years.

"Looking forward, we forecast Asos to generate over £900.0m of FCFE in the next five years, leaving ample firepower for the company to capitalise on additional attractive M&A opportunities should they arise," concluded Berenberg, which also reiterated its 'top pick' rating on the stock.

Barclays upgraded its stance on shares of Tate & Lyle on Tuesday to 'overweight' from 'equalweight' and hiked the price target to 875.0p from 700.0p, highlighting its increasing resilience.

The bank said Tate's roughly 60% price-to-earnings discount to European Ingredients peers is unjustified given its growth momentum in food and beverage solutions and increasingly apparent resilience in its primary products unit.

"The better-than-feared outcome of the calendar 2021 high fructose corn syrup pricing round that Tate presented last week at its Q3 21 trading statement is a key factor in our +5-6% group FY22e and FY23e EBIT upgrades, as well as our stronger FBS growth assumptions," Barclays said.

This leaves the banks' FY24 forecasts 4% ahead of consensus.

"We see increasing long-term potential for an acceleration in diversification of corn wet milling volumes from HFCS towards bio-based ingredients to drive a structural re-rating," it said.