Broker tips: Hargreaves Lansdown, Touchstone Exploration, Legal & General

Analysts at Barclays took a fresh look at financial services giant Hargreaves Lansdown following the release of the group's full-year results last week.

Barclays noted that full-year pre-tax profits had come in ahead of expectations on both better revenues and costs, with underlying pre-tax profits down 19% year-on-year at £297.5m - largely due to lower trading volumes and markets - but 5% ahead of consensus estimates as a result better costs.

However, Barclays did note that full-year net new business of £5.5bn was down from £8.7bn a year earlier and short of consensus estimates of £5.6bn, with 92,000 new clients, and highlighted that May and June had seen slower growth, with net new business of £700.0m and 2,000 net new clients. A negative mark-to-market also drove total assets under administration down 9% year-on-year to £123.8bn - 2% below consensus.

Despite this, HL still opted to raise revenue margin guidance for the new trading year on higher base rates, with Barclays stating the group's updated cost guidance implied 2023 costs would be below pre-results consensus, leading it to increase earnings per share estimates by roughly 15% and increase its price target on the stock from 1,175.0p to 1,225.0p.

Analysts at Canaccord Genuity slightly raised their target price on exploration and production firm Touchstone Exploration from 190.0p to 200.0p on Monday after the group secured environmental approvals for its Cascadura development.

Canaccord Genuity said on Monday that the key element to allow the Cascadura development on the Ortoire licence in Trinidad to proceed, approval of the Environmental Impact Assessment, had now been secured following confirmation from the Trinidad and Tobago Environmental Management Authority that no further information would be required.

"This in effect provides the 'green light' for the Cascadura development," said Canaccord. "The EIA forms the critical part of the company's application for a Certificate of Environmental Clearance to develop Cascadura. With the expected near-term formal CEC approval Touchstone now anticipates first Cascadura production can be achieved by YE22."

The Canadian bank noted that after a "rigorous and longer process" than it had expected earlier this year, it sees the news as "a highly significant step forward" not just for Cascadura but also as a template for the longer-term development of all its Ortoire licence resources.

"Consequently, we partially derisk our Cascadura area valuation," concluded the analysts, who stood by their 'speculative buy' rating on the stock.

In a note on the UK life insurance sector on Monday, JPMorgan Cazenove upped its stance on Legal & General on Monday.

JPM said the Pension Risk Transfer market was one of the strongest growth opportunities in European insurance with high barriers to entry and supportive of long-term divided per share growth.

It upgraded Legal & General to 'overweight' from 'neutral' and lifted the price target to 365.0p from 325.0p. JPM noted that L&G has dominated the PRT market for more than 20 years and offers the most innovative products with a strong franchise as an asset manager for Defined Benefit (DB) schemes.

"It is also growing in US PRT markets," JPM said. "It is the best placed company, in our view, to capture the PRT opportunity for growth in illiquid assets through its unique ‘L&G Capital’ unit. We believe it can translate this growth into 7%-8% compound annual growth rate DPS growth and has strongly improved its Solvency II ratio (216% 2022E)."