Broker tips: THG, Beazley

Canaccord Genuity downgraded shares of THG from 'speculative buy' to 'hold' after the e-commerce company's decision to reject a bid from private equity giant Apollo.

"The failure of the Apollo discussions will no doubt raise question marks over why," they said.

Furthermore, the trading environment in the sector remained tough and visibility on demand "limited".

The analysts also announced a change in their valuation methodology to sum-of-the-parts, on the back of which the target price reduced from 98.0p to 69.0p.

"We downgrade our recommendation to HOLD (from Speculative Buy), with THG currently trading on a FY23E EV/EBITDA of c.11x, at the top end of the UK eCommerce sector valuation range.

"In our view, it could be a long road to recovery, with an uncertain outlook and two of the three core divisions currently misfiring."

Analysts at Berenberg nudged up their profit estimates and target price for Beazley following the specialist insurer's "solid" trading statement for the first quarter, naming it their 'top pick' in the London market.

In their opinion, its strong growth momentum should reassure investors concerned about the outlook for growth in 2023.

Indeed, given the claims environment, its profitability was in line or better than market estimates, they said.

They also noted that Beazley's underwriting and risk management practices were above the market average.

Management's appetite for further exposure to property reinsurance was also deemed positive, saying that growth in the space was expected to be accretive to the firm's overall combined ratio.

All in all, the analysts judged that the shares remained fundamentally undervalued.

Their target price was nudged up from 875.0p 880.0p and their recommendation was kept at a 'buy'.