Broker tips: 888 Holdings, Scapa, SSE
Deutsche Bank analysts upped their target price for shares of 888 Holdings citing the "extremely strong" momentum observed seen over the start of the year, updates from rivals and data on its own markets.
All of those factors pointed to an "exceptionally strong" first half for the gambling outfit, which led them to mark up their target price from 160.0p to 188.0p and to reiterate their buy recommendation.
The company had already announced that it experienced "extremely strong" momentum in the first 14 weeks of the 2020 financial year, to which one had to add recent updates from competitors Flutter and William Hill.
Their forecasts were calling for 25% top-line growth in the front half of the year due to 888's big exposure to online casino and poker, scant exposure to sports and lack of retail.
"Even assuming a flat H2, as markets normalise with the resumption of sports activity, we see strong upward pressure on forecasts," they added.
Deutsche also raised its forecast for 2020 earnings before interest, taxes, depreciation and amortisation by 13% driving a 23% upgrade to its estimates for 888's earnings per share.
Analysts at Berenberg slightly raised their target price on healthcare and industrial group Scapa from 140.0p to 150.0p on Tuesday, stating the firm's 2020 numbers were better than it had anticipated.
Berenberg noted that Scapa's full-year revenue and cash generation performances came in ahead of expectations, while trading profit was in line with forecasts.
However, the analysts said few investors appeared to be focused on Scapa's full-year numbers and were more concerned about the continuing impact of Covid-19.
While Berenberg said trading in the first quarter of the group's 2021 trading year was better than expected so far, the analysts highlighted that Scapa itself had cautioned that the pace of recovery was "a little slower than it anticipated".
"In effect, rather than a shorter and steeper fall we now forecast a slightly longer but shallower decline before a more pronounced recovery in Q4," said Berenberg.
Either way, the German bank said the end result was the same and keep its trading profit forecasts for 2021 unchanged, except for earnings per share which fell to reflect equity dilution.
"While there are many stocks in the 'recovery category', in our view Scapa has far more improvement potential and a greater likelihood of achieving it than many we see elsewhere," concluded Berenberg, which reiterated its 'buy' rating on the group.
RBC Capital Markets upgraded its rating on shares of SSE to ‘sector perform’ from ‘underperform’ and hiked the price target to 1,400p from 1,150p to reflect greater visibility on dividends and an "attractive" mix of underlying assets concentrated in regulated networks and renewables.
The bank said that at the company’s FY20 results, some of its previous caution proved well-founded, with SSE announcing Covid-19 risks to FY21 EBIT of £150-250m and that £2bn of disposals were required to strengthen the balance sheet and maintain dividends.
"Nevertheless, renewed dividend clarity should be well received, and with a strong mix of networks and growing renewable activities, we upgrade SSE," it said.