Broker tips: Safestyle, Asiamet Resources, James Fisher

Liberum cut its stance on AIM-listed windows and doors specialist Safestyle to ‘hold’ from ‘buy’ after it warned on 2018 revenue and profits on Wednesday, reducing the target price to 130p from 200p.

Safestyle cautioned earlier that revenues and underlying profit for 2018 will be "materially below" the previous year’s levels and current market expectations as the market continues to deteriorate. It also said that the activities of "an aggressive new market entrant" have added to an already competitive landscape and hit certain areas of the group’s operations.

Liberum said that while the valuation is supportive, the share price performance is likely to be subdued until investors feel that the full impact of the new entrant is understood, and that Safestyle's cost savings programme has been successfully implemented.

"We understand that the new entrant has had a significant impact on Safestyle because it has started activities in Safestyle's northern heartland, and we also understand that it has attracted some self-employed sales and canvass representatives from Safestyle," Liberum said.

The brokerage cut its sales estimate by 10% for 2018, which it said should prove quite cautious as around 40% of leads are generated by door canvass, where the disruption has been felt most. It expects gross margins to be broadly maintained, with the impact of the new entrant offsetting the benefits from cost rationalisation measures undertaken by Safestyle, and estimates a reduction in overheads due to management actions to rationalise the group.

Liberum pointed out that management has pledged to maintain the 2017 full-year dividend and said the shares should also be supported by £9m of free cash flow at the trough and around £11m of net cash expected at the end of 2018.

Copper explorer Asiamet Resources was tipped as a 'buy' by Liberum on Wednesday as it has assets near to production and "globally significant" in scale, with its valuation implying it is the "best kept secret in copper".

Asiamet has 2.9m tonnes of attributable contained copper equivalent resources in the ground across two projects in Indonesia at an average 0.62% copper.

Exploration is ongoing and further resource additions are expected in 2018, Liberum said, as is the financing of its initial 25,000 tonnes per year SX-EW mine at Beruang Kanan Main, in Kalimantan. A bankable feasibility study is due in the second quarter and if it proves the resource would deliver 50% of the company’s current market cap in free cash slow by 2021 at $3 per lb of copper, analysts said.

Raising the entire equity portion required for development of BKM on AIM would be particularly dilutive, they admit, but believe Asiamet will look to sell a minority stake in its Kalimantan Surya Kencana (KSK) license to a local partner, "which should contribute materially towards the equity required for development of BKM and be highly accretive". If Asiamet sold a 40% stake in KSK this could be valued at $172m.

Their sum-of-the-parts valuation of 20p was double the last closing price, with comparisons with other stocks in the region "imply similar levels of mispricing", said analysts, pointing to a recent bid for ASX-listed Finders Resources, which operates in Indonesia.

Investors should take advantage of an unusual opportunity to buy James Fisher and Sons shares relatively cheaply, according to analysts at Canaccord Genuity.

The marine services company has a 23-year record of almost uninterrupted rising earnings and dividends, a balanced business and an established strategy, the analysts said as they upgraded the shares to ‘buy’ from ‘hold’.

This record has meant the shares are rarely cheap but they have fallen 10% in 2018, more rapidly than the wider market.

At £14.10 the shares at the time of writing were trading at 16 times forecast 2018 earnings compared with an average of 17 times over the past three years.

Annual results on 27 February were good and more than £40m could be freed for acquisitions as capital requirements stabilise. The company’s offshore oil business will probably do better this year and the consensus for 2018 earnings is on the low side, the analysts said.