Broker tips: Cerillion, Watches of Switzerland, Persimmon

Canaccord said the experience of Cerillion's senior management in the billing and CRM software solutions area was "impressive", with both the chief executive and financial officers having been with the group effectively since the management buyout in 1999.

The Canadian bank stated that with the advent of a telecom super cycle in 5G and an important Nokia partnership providing additional pipeline potential, it believes that sales growth should be roughly 10% compound annual growth rate over the next three years.

Canaccord highlighted that Cerillion's order book at the end of the first half stood at over £19.0m and that it already held £5.5m in contracted support and subscription revenues.

Additionally, Canaccord also pointed out that back in September, Cerillion was awarded its largest-ever contract - an £11.2m agreement with an unnamed "major UK connectivity provider", with the vast majority being recognised in 2021/22.

Jefferies initiated coverage of Watches of Switzerland on Thursday with a ‘buy’ rating and 470.0p price target, saying it’s a proxy play on the more attractive end of the luxury watch market and is well-placed to perform in the underdeveloped US market.

"There is more upside in spite of the recent rerating as outperformance will continue and the investment case is not well known," it added.

The bank also highlighted the company's relationship with Rolex and the expansion opportunity in the US. The top seven brands, led by Rolex, account for 74% of sales, it said.

"The group primarily sells high-end luxury watches which accounted for 84% of sales in FY20: Rolex is the key brand for and accounts for circa 54% of group sales, and growing.

"Whilst this implies WOSG is de facto a Rolex proxy, there is more to the name than meets the eye as it continues to increase profile and share via selling space accretion, store elevation, improving clienteling and dominance in digital."

Housebuilder Persimmon rallied on Thursday as JPMorgan Cazenove argued that recent weakness provides a buying opportunity ahead of a trading update next week, which it expects to be a positive catalyst, and said it was still its "top idea" in the UK housebuilding sector.

The bank, which has an 'overweight' rating on the stock with a 3,210.0p target price, noted that Persimmon's share price has outperformed the UK housebuilding sector by 23% year-to-date, but has lagged the sector over the last two months.

"In our view, this presents a buying opportunity ahead of the trading update next week, with the group’s valuation on 8.8x 2021E adjusted price-to-earnings, at a discount to the sector average of 10.2x and its historical average of 10.5x."

It lifted its adjusted pre-tax profit forecast to £860.0m from £820.0m previously, putting it 2% ahead of consensus.

JPM's expectations for the update next week are an upgrade to conservative guidance, reinstatement of the remainder of the 2019 dividend and some moderation yet a solid trend in the sales rate, which had significantly improved over the summer.