Broker tips: Randgold Resources, Zoopla, Santander

Numis on Thursday downgraded its rating on Randgold Resources to ‘add’ from ‘buy’ and reiterated a target price of 8,000p, citing the mining company’s recent share price appreciation.

On Monday Randgold said negotiations were under way to resolve a protest at its Tongon mine on the Ivory Coast. About 100 employees have staged an “illegal sit-in” since the end of last week, demanding annual ex gratia payments, the miner said.

Numis expects the company will lose 1,300 ounces of production over that period. “However, mining activities continued during the six day plant stoppage and some of the lost throughput may be caught up in the quarter and year,” the broker said.

Numis also noted Randgold’s production rebounded in the third quarter following a difficult second quarter. In November Randgold reported a 7% increase in gold production to 301,163 ounces in the third quarter, boosted by strong performances at the Tongon and Kibali mines.

The miner is on track for a “strong end” to 2016, Numis said. The company reports its full year production figures next week.

Randgold in November said its forward guidance was 290,000 ounces per year for the 2017 to 2020 period. The group’s exploration is focused on satellite ore sources on the Tongon permit to extend its mine life. Randgold is also looking to advance a prospective package of regional exploration permits elsewhere in Cote D'Ivoire, including Boundiali and Mankono.

Macquarie has downgraded Zoopla Property Group to ‘neutral’ from ‘outperform’ and raised its price target to 375p from 360p.

“We lower our recommendation to 'neutral' from 'outperform' based on the increase in share price to our target price, the absence of a more bullish Comparison Services trading and our expectations for growth in Comparison Services revenue to slow after the first quarter of fiscal year 2017.”

The group recently acquired Hometrack, an automated valuation model (AVM) which tracks residential property data, analysis and valuations to 400 partners, including the 15 of the top 20 UK mortgage brokers. The property company is paying £120m plus a further earn out of up to £25m over 10 years.

The takeover is expected to be earnings accretive starting 2018. The broker believes that the deal will further build the group's property resources and add scale to its data services business and its business with mortgage lenders.

Hometrack’s superior valuation tool also provides cross-selling opportunities by offering accurate and comprehensive valuations to both homeowners and buyers, increasing the value of the company’s portal to visitors.

The company also provided a trading update saying UK Agency partners continue to grow and comparison services continues to enjoy solid switching volumes. The broker said it expected a more positive statement for Comparison Services given strong market data and results from peers.

“Zoopla’s Comparison Services offers higher long-term growth due to a less penetrated market and supportive regulation,” said the broker.

The adjusted earnings per share (EPS) estimate for 2017 has been cut by 3% but the forecast for 2018 EPS has been raised by 3% for 2018.

UBS upgraded Santander to ‘buy’ from ‘neutral’ and raised it share price target to €5.85 from €4.15.

A strong fourth quarter prompted the broker to raise its earnings per share estimates (EPS) by 7-10% for 2017 and 2018, with the latest set of "strong" financials solidifying its view of the bank’s improved earnings momentum and profitability premium.

The broker’s more positive take is due to increased conviction on Brazil’s turnaround, less cautious view on UK/Spain net interest income (NII) and improved foreign exchange dynamics.

Brazil’s improved outlook is instrumental in the Spanish lender’s enhanced profit power. The fourth quarter reflected that with fading deleveraging pressure combining with positive net interest margin (NIM) progression in the initial phase of a monetary easing cycle, strong fee progress and more stable cost of revenue (CoR) prospects for a 15 to 20% compound annual growth rate (CAGR) 2017/18 estimate net profit growth in local currency terms.

Although the bank does not score well on the capital front with an approximate 10.5% fully loaded common equity tier 1 (FLCET1) ratio, there has been no “meaningful impact” on the broker’s valuation.

"That said, the 50bps formation throughout 2016 met guidance after absorbing a 40% cash payout, and our estimates suggest SAN reaches its 11% target one year ahead of the 18E deadline. Our take is hence pragmatic, and we see capital as having no meaningful impact on our valuation."