Broker tips: BHP, Equals Group
Analysts at Berenberg reiterated their 'hold' rating on mining giant BHP on Wednesday, stating its recently announced bid for OZ Minerals was "sensible" but "too low".
On 7 August, BHP announced an offer to acquire ASX-listed OZ Minerals at AUD $25.0 (£14.64) per share, following rival Rio Tinto's offer to acquire the minorities of Turquoise Hill Resources.
"In both scenarios, the offers were rejected, suggesting opportunistic timing by the acquirors, with the acquirees likely indicating that full value was not recognised in each case," said Berenberg.
The German bank stated that BHP's offer took some parts of the market by surprise, in terms of both the identity of the target and whether this was the start of a new wave of "value-destructive M&A" by the firm.
"We do not believe either is the case: OZ is a decent business with good assets, which we think offer upside in the broader BHP portfolio. While the upside to the OZ deal needs a bit more explaining than other M&A (eg Rio/TRQ), we see value in it and think BHP will need to pay more to secure the assets, as the OZ share price implies," said the analysts, who also reiterated their 2,100.0p target price on the stock.
"We think an eventual valuation in the low AUD $30s per share is a sensible price to pay, given risks and opportunities."
Analysts at Canaccord Genuity retained their 'buy' rating on IT service management company Equals Group on Wednesday following the company's "record" first-half results.
Canaccord Genuity said Equals had reported "an excellent set of results", demonstrating "strong progress" during the half and providing a "bullish" outlook.
The Canadian bank noted that performance was said to "remain in line with expectations for the full year", leading it to leave its forecasts unchanged for the time being but said it believes positive momentum implies upside risk.
"Trading has remained strong in Q3'22 despite economic headwinds, with QTD (to 5 Sep) revenue of £13.3m (+55% y/y) and YTD revenue of £44.7m. This represents 69% of our full-year forecast (£65.0m)," said the analysts.
"EQLS is trading strongly. Revenue growth is accelerating and management's comments about current trading give us considerable comfort in the likely full-year result. The ongoing strengthening of the balance sheet also gives options, whether it be M&A, organic expansion &/or the commencement of a dividend policy. For the time being, we leave our forecasts unchanged."
Canaccord also stood by its 144.0p target price on the stock.