Broker tips: Saietta, Rightmove, Hollywood Bowl, Spectris

Canaccord Genuity put its rating on engineering company Saietta 'under review' on Thursday following the publication of the group's full-year results.

Canaccord Genuity noted that revenue and grant income of £4.8mn was up 11% year-on-year, while adjusted underlying losses widened to £13.9m from £4.4m. Cash at the end of March was £7.2m.

Saietta also announced two further "substantial developments" at its Saietta VNA joint venture - one for an RFT e-drive system for at least 50,000 vehicles over five years and one for an RFT e-drive system, targeting 800,000 vehicles over five years.

The Canadian bank said that with the suspension and disposal of various non-core activities, Saietta had largely returned to its original IPO vision of being a UK-based technology company, with a "significant position in Indian two- and three-wheeler e-drive technology" and customers for its AFT e-drive systems being "largely on licence-and-royalty arrangements".

As a result, Canaccord made a number of changes to its model, notably ensuring Saietta VNA was "correctly treated" as a joint venture and not in underlying earnings, and updating forecasts to better reflect the group's cash requirements over the next 18 months.

"We note the group's statement about its requirement for additional funding in 4Q 2023 and to support further growth," said Canaccord. Given the uncertainty on funding and the pending lifting of the share suspension, we place our rating and target price under review (from 'buy', 80.0p target price)."

Bank of America Merrill Lynch reiterated its 'buy' rating on Rightmove on Thursday as it awaited "further developments", after smaller rival OnTheMarket agreed to be taken over by US commercial real estate information group CoStar in a £99.0m deal.

BofA, which has a 625.0p price target on the stock, said the news could initially be taken negatively for Rightmove, given CoStar's significant scale - it has a market cap of $32.0bn - and expertise in US residential and commercial real estate.

"That said, history has shown unseating incumbents in the classified space is no easy feat," the bank said. "And Rightmove is a significant market leader even by classifieds’ high standards, boasting 86% share of consumer engagement."

Making a few "points for context", BofA noted that network effects in the online classified space have generally proven durable in Europe, and said it thinks are potentially strongest in real estate.

It also pointed out that OTM was created by estate agents in 2013 to provide an alternative to the two main portals, but has been unable to match Rightmove's scale. It lists 13,200 advertisers as of FY23 versus the rival's 19,000, and Rightmove commands an impressive 86% share of consumer engagement, the bank noted.

Analysts at Berenberg raised their target price on ten-pin bowling centres operator Hollywood Bowl from 370.0p to 400.0p on Thursday, citing the group's "record results".

Berenberg said Hollywood Bowl was one of its "top picks" in the leisure space, with the company delivering a record full-year performance thanks to "strong growth" in the UK and "continued momentum" in Canada.

Revenue of £215.0m was 8% ahead of Berenberg's expectations and was driven by both strong demand and favourable weather conditions. The company also expects to report pre-IFRS16 underlying earnings growth ahead of market expectations and, as a result, the analysts increase their estimates for FY23 by 9% to £62.7m.

"With its market-leading position in the UK and the growth opportunities in Canada, as well as the continued cash flow generation of the business, we remain confident in the outlook for Hollywood Bowl," said Berenberg, which reiterated its 'buy' rating on the stock.

"Despite this and the consistent outperformance compared to market expectations, shares have fallen 5% year-to-date, which we think is unjustified."

Industrial equipment manufacturer Spectris' recent share price falls were not done yet, according to JPMorgan, which reiterated its 'underweight' position on the stock cut its target price from 3,100.0p to 2,850.0p.

"While shares have fallen 14% since July, they are +4% year-to-date, outperforming instrumentation peers by circa 25% with the shares de-rating by 10% less than peers who have already cut guidance on China, life sciences and semiconductor end markets," said analyst Lushanthan Mahendrarajah.

In a research report ahead of the company's third-quarter update on 31 October, Mahendrarajah said that newsflow since Spectris' interim results in late July suggested orders will have continued to soften, and so cuts to 2024 forecasts were likely.

"With the shares trading on 11.4x 12-month forward consensus EV/EBIT, in line with its historic discount to instrumentation peers and a lower discount to Oxford Instruments versus history, we do not believe risks are reflected in the share price and remain underweight," the analyst said.