Broker tips: Polypipe, Premier Oil, Boohoo

Analysts at Berenberg reiterated their 'hold' rating on plastic piping manufacturer Polypipe on Wednesday, noting that although near-term uncertainty remained, the group was poised to be a "mid-term winner".

Berenberg said that after hosting a virtual "fireside chat" with Polypipe chief financial officer Paul James, on 16 June, it felt positive about medium-term structural opportunities presented to the group as it continues its transition into a "one-stop-shop".

The German bank said Polypipe's transition should also be aided by its "strong balance sheet" since its £120m equity raise in May but still warned that nearer-term, uncertainty was "high" and said it remained "cautious" on the pace of the recovery in key end-markets.

"Management said that the high uncertainty means that it is taking a cautious approach to capex budgets and M&A, with the next two to three months being crucial for how it chooses to proceed," said the analysts.

"When assessing this against current valuation, we see better risk/reward elsewhere in the sector," added Berenberg, which kept its 480p target price on the group unchanged.

Analysts at Canaccord Genuity raised their target price for shares of Premier Oil, but kept their recommendation at a 'hold', arguing that they were fully valued.

In a research note sent to clients, they conceded the recent positives around the outfit, including revised terms for purchasing assets from BP, recent cash call, reduced shorts against its stock and with a debt maturity extension now looking likely.

"All this sets the company on an improved path, aided by the more buoyant oil prices," they said.

However, they went on to add that: "While we recognise the advances, we are not yet convinced that the equity investment case - though improved - is justified at our commodity price assumptions."

Berenberg added that Premier "looks fully valued" but did still up their target price from 25.0p to 35.0p.

Broker Liberum reiterated its ‘conviction buy’ rating on shares of Boohoo on Wednesday and lifted its price target to 500p from 490p after the fast-fashion retailer’s "blowout" first-quarter update.

For the three months to the end of May, Boohoo reported a 45% jump in group revenue to £367.8m, with strong underlying growth across Boohoo, PrettyLittleThing, while newer brands MissPap, Karen Millen and Coast continued to trade strongly.

Liberum said that while the company has no doubt benefited from its main bricks and mortars competitors being closed, "it truly is a standout performance".

Boohoo also announced that it had agreed to buy the online businesses and intellectual property of Oasis and Warehouse from retail investor Hilco Capital for £5.25m in cash.

Liberum said it remains a big fan of Boohoo’s M&A strategy, "as it continues to build an online ‘house of brands’ to expands its addressable population of fashion customers and grow its share of the global market, which remains low: UK 3.6%, Europe 0.3% and US 0.3%.

"We certainly expect more acquisitions as it utilises the recent circa £200m equity raise for M&A."