Market buzz: Severn Trent down and ITV up as analysts opine

1226: The FTSE 100 is being held down by a stronger pound, down very slightly just past midday. Mike van Dulken, head of research at Accendo Markets, notes that the pound is helping miners while healthcare is under pressure ahead of a President Trump speech on the matter.

“The FTSE100 is flat in its last session of the week, held back by GBP trading up off its lows to hinder those with international exposure and/or dividends," MVD says.

"Healthcare is also under pressure ahead of a Trump speech which could see him take another swipe at high drug pricing. Sterling's climb, however has a silver lining for miners, with corresponding USD weakness offering more help to commodities and miners, and keeping oil up around 3.5-year highs to buoy energy names."

He sees HSBC up on its share buyback plans and Asia optimism, while GSK is seeing the negative drag from the Trump speech, Shell down on profit taking and oil coming off its highs, with Unilever, Prudential and AB Foods hit by profit taking and the stronger GBP.

1052: ITV is attracting interest a day after its first trading update under new boss Carolyn McCall. JPMorgan Cazenove analyst Daniel Kerven this morning highlights the strategic value of ITV to a potential acquirer such as Liberty Global or others as it "offers English language content and has the most efficient platform for the video monetisation of content in the UK" and for telecoms companies "the opportunity to use its content channels cross promotion to drive convergence benefits/quad play market share and much bigger revenue streams".

"We believe that content is also becoming more important to tech given that it drives engagement which can be monetised across a broader ecosystem. Addressable TV will make FTA increasingly strategic as it will become by far and away the biggest platform for data driven targeted video advertising with very high quality, brand safe ad inventory."

Liberty Global, which could soon have a big chunk of cash from Vodafone if its asset sale is waved through by regultors, already has a 10% stake in ITV. Should the UK become a bigger part of its portfolio and it have increased financial flexibility in the coming months, Cazenove says "it may look to realise potential synergies" by buying ITV.

1048: Differing analyst opinions on water companies, including Severn Trent, this morning. Bernstein is downgrading SVT to 'underperform' from 'market perform', suggesting investors take profits due to strengthening regulatory headwinds. This has seen the shares fall more than 2% this morning.

JPMorgan Cazenove analysts on the other hand "generally see value in UK utilities" and is upbeat on UK water’s prospects in the coming months, with 'overweight' recommendations for SVT, United Utilities and Pennon.

But Caz is "relatively cautious" on energy, with Ofgem set to hand down key decisions impacting retail margins such as price cap policy consultation due later this month, plus the RIIO-2 framework consultation due in July.

National Grid remains 'overweight' and Centrica and SSE remain 'neutral' based on valuation grounds, for now.

1035: Barclays says it remains confident about AstraZeneca, having updated its forecast model to reflect positively revised estimates for hyperkalemia asset Lokelma and its expectation that "an imminently due (and long-awaited) FDA approval will drive another blockbuster opportunity for AZN".

Whilst acknowledging full year guidance "failed to satisfy best hopes for the pace of leverage from the emerging portfolio", analysts remain "confident on execution and the pipeline thesis continues to unfold largely as anticipated", seeing "good risk-reward" into forthcoming immunooncology-doublet data as well as roxadustat in the fourth quarter.

Analysts lifted their P/E based price target 3% to £65, reflecting FX tailwinds and raised Lokelma estimates for what it their top pick in EU pharma.

1033: After Randgold's results yesterday sent the shares 7% lower, Citi say the shares are "even more compelling" and a creates a "great buying opportunity" following the market's "over-reaction".

"Randgold is one of the best quality gold companies globally, in our view, and is our preferred gold equity exposure," Citi said, pointing to a 5.6% dividend yield on its forecast and "looks attractive" at less than 20 times 2018 P/E versus a 10-year average around 25 times.

Highlights from management's presentation were seen as Congo's new mining code having a $5-10m impact, the Loulo-Gounkoto complex to improve quarter on quarter, management being "open to inorganic opportunities", Massawa in eastern Senegal "set to meet" criteria and that the Senegal mining code revision "has no impact".