Broker tips: BP, RPC Group, Mothercare

Deutsche Bank reiterated its 'buy' stance on shares of BP, telling clients the oil major's downstream operations were being significantly undervalued.

Ahead of BP's Downstream Day on 14 June, analyst Lucas Hermann pointed out how consensus was still only estimating just over $6bn of free cash flow from the segment by 2012, versus the between $9bn to $10bn the company itself was guiding towards.

The mix of businesses that made up BP's downstream ops were more "more robust, better positioned and appeared to hold substantially more potential" than they were credited for, Hermann said.

"Our analysis suggests the potential for capital-light growth that is way ahead of the evident consensus," he said.

BP's downstream units were also significantly undervalued versus those of its peers Royal Dutch Shell and Total.

As the costs associated with Macondo fell, investors should gain greater conviction in BP's dividend, according to the analyst.

Hermann stayed at a 'buy' recommendation on BP with a target price of 515.0p.

JP Morgan said investors risked overlooking the merits of RPC Group's 'equity story' amid the din of the negative share price reaction to the company's fiscal year 2017 results.

RPC has an established trackrecord of extracting "meaningful and sustainable" cost synergies as it consolidates a fragmented packaging market, the investment bank explained.

"This is a strategy that we believe will continue to generate shareholder value in the years ahead."

Changing hands on a price-to-earnings multiple of 10, that opportunity was not being captured in the share price, the broker said.

Analysts at Berenberg upgraded their recommendation on shares of Mothercare from 'sell' to 'hold' after its UK arm moved past breakeven and ahead of an expected boost to its foreign operations from a weaker pound.

Since they downgraded the company to 'sell' in April 2016 the stock had fallen by roughly 20%, versus a gain of the same magnitude for the FTSE All Share.

Estimates were now more "reasonable", the broker added.

Furthermore, management had guided towards a further reduction of the company's footprint in the UK from about 150 stores at present to between 80 to 100 over the next five years.

In parallel, now that its pre-Brexit currency hedges had rolled off it would begin to feel the benefit of weakness in Sterling.

Berenberg did take issue with Mothercare's international unit, labelling it a 'black-box'.