Broker tips: Lords Group, Shell, Entain, Flutter Entertainment

Analysts at Berenberg initiated coverage on construction goods distributor Lords Group with a 'buy' rating on Thursday, stating it was a "fast-growing UK builders' merchant".

Berenberg highlighted that Lords Group was currently pursuing a growth strategy, with management targeting £500.0m of revenue by 2024, up from £363.0m in 2021, after already growing revenues at a 67% compound annual growth rate between 2018 and 2021.

While the German bank said Lords, which it issued a 120.0p target price, offered exposure to the "structurally attractive" renovation, maintenance, and improvement market, it also noted the group has "numerous company-specific levers" to pull in order to grow revenues and optimise margins.

"If it delivers its margin target, we think there is material upside to earnings forecasts. We initiate with a 'buy' rating and a price target of 120.0p, implying upside of 37% to the current share price," said Berenberg.

"Shares currently trade on 2023E 8x EV/EBIT, compared to peers at 9.5x. We believe that, as the group establishes its track record in public markets and continues to take market share while optimising margins, it can close this valuation gap versus peers."

Credit Suisse initiated coverage of Shell on Thursday as it said in a note that it is positive on integrated energy, but in its relative ratings framework, the bank's bottom-up stock picking is nuanced to reflect what the market is pricing in.

It started Shell at 'outperform' with a 3,000.0p price target, saying the oil giant was its "top pick" with the highest free cash flow yield among the supermajors, and an integrated energy model that is underappreciated by investors.

"Shell's energy transition strategy stands out as the most progressive in terms of decarbonisation and, at the same time, for generating strong cash flow that supports shareholder distributions in the near and medium term," it said.

CS forecasts average cash flow from operations of $47.0bn for 2021-26E, "comfortably" covering its cash capex while delivering on its commitment to pay out 20-30% of its CFFO as shareholder distributions.

Analysts at Citi told clients to 'buy' shares of Entain and Flutter Entertainment after revising higher their estimate of the total addressable market opportunity in the US for both and on expectations for greater regulatory clarity.

Citi also believes that a recent sell-off in both shares provided an "attractive" entry point.

The analysts said the US TAM was now pegged at $45.0bn, up from $39.0bn previously, due to higher iGaming per capita spend, which led them to bump up their target price for Entain from £27 to £28 and for Flutter from £145 to £152.

Furthermore, Citi said the UK Gambling Act review should act as a meaningful positive catalyst, even if online slot takes were cut to £2.

In the case of Entain, Citi also noted it was not counting out a second bid from rival MGM, albeit at a smaller premium than in May.

Reporting by Iain Gilbert, Michele Maatouk and Alexander Bueso at Sharecast.com