Broker tips: Allied Minds, Premier Oil, Domino's, Just Eat

The US-based FTSE 250 science and technology developer invested $5m in the fundraising and the rest came from Woodford Investment Management. Allied Minds has increased its stake in Federated Wireless to 73% from 91%, boosting net asset value by $51m.

The group said the proceeds of the funding would enable Federated Wireless to complete its Spectrum Access System (SAS) and Environmental Sensor Capability (ESC) certification, conclude the development and accelerate the commercialisation of its cloud-hosted CINQ platform, as well as conduct field trials in the second half of 2016 with its technology partners.

“Allied Minds last reported a portfolio asset valuation of $488m with its FY14 results and we would expect this to be updated with the FY15 results for developments such as the Precision Biopsy fund raise in October 2015 and today’s news relating, leading to an uplift of $97m, before any other adjustments,” said Numis analyst Sally Taylor.

“On this basis the stock is trading at 1.3x net asset value.”

The broker gave the company a target price of 688p.

Nomura upgraded Premier Oil to ‘buy’ from ‘neutral’ and lifted the price target to 80p from 75p, saying the E.ON acquisition is value accretive and the stock is "one for the oil bulls".

The bank outlined three reasons to turn buyers.

It said its analysis of the data for the pending E.ON deal suggests it is value accretive and positive to Premier’s debt covenants.

Nomura said the re-negotiation of partner capex carry in the Falklands reduces future debt.

Finally, it pointed out that the two factors mentioned above increase the duration and value of the call option that Premier shares offer investors to higher oil prices .

“The downside case is an equity valuation that is negligible if the forward curve materialises, which should be well known. However, we also see an option with a payoff of over 5x in the event of higher prices,” said Nomura.

“With increasing capacity to survive current prices for at least 12 months, we think the risk-reward from a broader portfolio basis (either as a hedge to an underweight Energy position or as an outright bull on oil prices), is worth taking.”

The upgrade by Nomura was made before the oil and gas exploration and production company announced on Monday that amendments had been made to the terms of its deal with E.ON and the stock resumed trading.

Nomura released another note after the announcement, saying that even at the level the shares have resumed trading on Monday, around 40p, the risk/reward is attractive for those with a higher risk appetite and a constructive view on crude prices.

UBS has initiated coverage of Domino’s Pizza at ‘neutral’ with a target price of 975p and Just Eat at ‘sell’ with a target price of 330p.

The investment bank said Domino’s is one of the winners in the growing online takeaway market.

“Our Evidence Lab survey of more than 1,000 respondents in the UK gives us confidence that the impact of third-party operators such as Just Eat should be limited in the long term, and that Domino's can continue to benefit from the increasing penetration of online and mobile in the UK takeaway market.”

The survey also showed that taste and delivery speed were among the top four factors most valued by customers – factors that can’t be controlled by food delivery aggregators like Just Eat.

However UBS said Domino's long-term growth potential has been limited by the joint venture with its German business.

“Whilst this provides a short-term fix to what has been a problematic region, we think Domino's has lost a significant long-term growth opportunity.”

For Just Eat, UBS said its survey suggests that Just Eat is the leading takeaway aggregator in the UK and France.

However the number of competitor platforms and the impact on the company is underestimated.

“We believe three-sided marketplaces that include a delivery element – like Deliveroo and UberEATS – represent more compelling solutions for both diners and restaurants, since they have greater control over quality and delivery times, and offer online access to restaurants that do not have delivery capabilities.”