Broker tips: Worldpay, IAG, British Land

Barclays downgraded Worldpay to 'equal weight' on Wednesday as it raised some questions about the payment group's growth ambitions.

The bank, which left its price target unchanged at 315p, said "we cannot find enough upside to warrant a price target increase and we have some concern regarding the organic growth trend"

WPG has endured many one-off revenue impacts, which Barclays analyst Gerardus Vos attempted to exclude in order to root out an underlying organic growth trend: this showed that the business slowed in each of the last three half years.

Calculating that underlying organic growth peaked at 9.6% in the first half of 2015 and slowed to 6.3% in the second half of last year, he calculated that Worldpay is able to generate around 8-9% organic growth, with anything higher requiring market share gains, pricing or value chain expansion.

Analysts at HSBC bumped up their estimates and target price for shares of IAG, admitting to clients that its 'reduce' recommendation was anti-consensual, but stuck to their view nonetheless.

Following the company's "confident" first quarter presentation the broker marked up its estimates for fiscal year 2017 earnings before interest and taxes and earnings per share by 13% and 19%, respectively.

In turn, HSBC also boosted its target price on the stock from 490.0p to 525.0p.

However, its chosen method for measuring free cash flows had several drawbacks, according to analysts Andrew Lobbenberg, Achal Kumar and Edward Stanford.

In particular, IAG's decision to 'flex' to a higher share of operating lease aircraft flattered its cashflows "materially".

BA's pensions also constituted a "material call" on those cash-flows while excluding its exceptional costs.

Management had however been forthright and transparent with investors on its accounting practices and intentions going forward, they said.

Numis upgraded its recommendations on British Land and Land Securities to reflect their improved capital value assumptions for the pair, which had been overly bearish, even as it expressed a preference for small and mid-cap firms because of the risk aversion prevalent among management teams.

On the back of the latest full-year 2016 results from the sector, Numis said: "looking forward, we see little changing. Capital values are unlikely to collapse in either London or Retail so to differentiate themselves, REITs will need to actively create value but risk appetite is largely absent.

"The dominant theme, however, has been one of positioning for a disorderly unwind of the cycle (with Brexit an additional factor not the sole driver) rather than to exploit opportunities," they said.

Furthermore, the longer that uncertainty around the EU persisted there was even less reason to invest in the majors, it believed.