Broker tips: Coca-Cola HBC, Shire, Centamin

Beverage bottler Coca-Cola HBC shares jumped on Friday after Citigroup upgraded the stock to ‘buy’.

Analysts at Citigroup said the company’s shares trade at a five-year peak discount to peers.

While they acknowledged concerns – including a potential naira devaluation and rising sugar prices –the analysts felt "these concerns are priced in, providing a good opportunity to buy into improving fundamentals”.

Citigroup expects a visible margin recovery opportunity to be a key driver of share performance.

The broker predicts margins will be subdued this year before accelerating in 2017-18 by 40 basis points, driven by further cost savings and enough price/mix to offset input cost headwinds.

“This should result in a compelling 9% earnings before interest and tax growth,” Citigroup said.

JPMorgan Cazenove lifted its price target on overweight-rated Shire to 5,600p from 5,300p and added the stock to its 'Analyst Focus List', saying the acquisition of US-based Baxalta builds a more sustainable company trading at a compelling valuation.

“Over the next 12 months we expect the market to take a more positive view on the sustainability of the Shaxalta growth outlook and anticipate a re-rating from 12x to 16x 2017e PE, equating to our 5,600p Dec-16 price target.”

JPM said its haemophilia model finds greater sustainability for Baxalta’s franchise than the market fears.

In addition, it argued the strong outlook for Baxalta’s non-haemophilia franchise is being overlooked. “We believe the market has overlooked the sustainability of the c.20% of NewCo revenues from products outside haemophilia, i.e. Immunoglobulins (IG), Albumin and A1PI.”

The bank now forecasts a 2017-20 core earnings per share compound annual growth rate of 13% versus 10% previously.

“Mid-single digit core EPS accretion by 2020 is solid, if unspectacular. But more important is the double-digit accretion post Vyvanse,” JPM said.

Centamin got a boost on Friday as Morgan Stanley initiated coverage of the stock at ‘overweight’ with a 130p price target, saying it was its top pick within the European gold space.

“Sukari provides a solid foundation from which to grow the business with a 7% free cash flow yield in 2017e.This can be invested either at Sukari, or outside of Egypt, or alternatively returned to shareholders if no viable project is identified. Valuation does not reflect this optionality in our view.”

However, the bank pointed out that absolute upside is still largely dependent on the outlook for gold prices.

MS said Centamin deserves to trade at a premium to peers Acacia and Hochschild.

At Acacia, the operation outlook is more uncertain, it said, with 2016 guidance downgraded at the start of the year due to issues at the flagship mine. At Hochschild, the most important mine, Inmaculada, has not even been operating for a full yesar yet, meaning risk is elevated.

Morgan Stanley said that having mined open pit ore since 2010 and underground development ore since 2011, the operating risk at Centamin's Sukari is now below that of its peers.

“This lower operating risk, alongside balance sheet optionality and undemanding valuation make Centamin our top pick in the European listed gold space.”

As far as the outlook for gold is concerned, MS said it remains balanced, with bull factors of market anxiety and uncertainty over China's growth outlook and bear factors of low inflation and positive US economic growth, offsetting each other.