Broker tips: SIG, Barclays, Cineworld

Jefferies upgraded insulation and roofing supplier SIG to 'buy' from 'hold' and lifted the price target to 200p from 150p saying the recent strategy day mapped out a credible turnaround plan.

"The road will not be straight, but we expect management to fully deliver on their 5% margin targets in the medium term. Much of the turnaround lies within the group’s control and is not predicated on rapid recovery in the group’s end markets" it said.

Jefferies pointed out that SIG's strategy is to achieve 5% return on sales and 15% return on capital employed margins in the medium term, while reducing leverage to less than 1x. It said that in essence, the strategy involves doing more with what the group already has.

Management has identified three strategic levers, customer service, customer value and operational efficiency, supported by enhanced data and IT services.

Threadneedle Street's stress tests are "somewhat negative" for the UK listed domestic banks, said Exane BNP Paribas on Tuesday, warning that it "raises questions over the speed to dividend normalisation".

Exane noted that the £50bn of losses revealed in the Bank of England's stress tests were much larger than seen in the 2016 stress test and "are likely to raise concerns over the extent to which PRA buffers are required".

The Bank said no banks needed to make changes as a result of the test, the first time it has been able to do this since the tests started in 2014, but its Financial Policy Committee will now review whether an additional capital cushion is needed. Such an extra buffer would be determined by the Prudential Regulation Authority.

Exane added that by the time fully loaded requirements become binding at the start of 2019 these numbers might have changed markedly, with misconduct costs expected to fall markedly over the next year or two, "but the size of these losses will still raise question marks over these banks".

Exane said its initial view is that Barclays "looks most vulnerable of the UK domestic banks to a PRA buffer" at the start of 2019, particularly given it also lost 450bps in last year’s test and the PRA does not focus on just one year’s numbers.

Cineworld got a boost on Tuesday as Numis lifted its stance on the stock to 'buy' from 'hold' and bumped up the target price by 10% to 825p following recent share price weakness.

The brokerage pointed out that the shares are down 10% since mid-August on the back of weak but cyclical UK admissions.

This, combined with Numis' expectations for upgrades next year thanks to a strong film slate and mid-single digit underlying ticket prices, leads to the rating upgrade.

Numis said Cineworld's share price has been dented by a 17% drop in UK cinema admissions between August and October. However, it argued that only twice in the last 30 years have admissions fallen in consecutive years and said it is confident the quality of the film slate for the remainder of the year - which includes Star Wars VIII on 14 December - and in 2018 will support a robust outcome.

The brokerage pointed to the fact that Cineworld increased its UK ticket prices last month and restructured its 'My Cineworld Plus' scheme, effectively disincentivising the 10% online discount.

"We think customers are sufficiently engaged and the film slate sufficiently strong for this price rise to not impact admission levels (+5% average ticket price in 2018). We are therefore increasing FY18E earning per share by 3%, which is 4% ahead of consensus."