Broker tips: Gem Diamonds, Asos, Ocado

This means that revenue should be above the brokerage’s initial forecasts. Canaccord said it has reworked its forecasts, building in additional revenue of $55m in FY18 to reflect three +100ct stones and the 910ct recovered this year.

“While near-term strength in the ZAR (below 12:1 to the USD for the first time since mid-2015 due mainly to a weaker USD, but also helped by political changes in South Africa) is a headwind given it boosts USD costs, our valuation rises and pushes our price target to 120p (from 95p).

“We have reduced the weighting of the PE and EV/EBITDA measures in our price target setting to reflect our view that the 910ct may not be repeated and thus FY18 EPS may be ‘artificially’ boosted, but we continue to assume that the incidence of +100ct Type IIa diamonds will continue to increase.”

Gem Diamonds made two announcements of diamond discoveries this month. The first was “an exceptional quality” 910 carat, D colour Type IIa diamond while the second was an “exceptional quality” 149 carat, D colour Type IIa diamond, both form the Letseng mine.

In a note in which it considered the most likely potential internet M&A scenarios, RBC said the Just Eat’s cash reserves and more sophisticated data analytics could benefit Takeaway.com and provide greater firepower to compete with Delivery Hero in Germany.

In the same note, RBC argued that Asos, Zalando and Ocado were “the most likely take-out candidates” in its coverage and as a result, it applied a 10% M&A premium to its valuation for those stocks.

Accordingly, it lifted its price target on outperform-rated Asos to 8,100p from 7,400p, on underperform-rated Zalando to €41 from €35 and on sector-perform rated Ocado to 525p from 320p.

RBC said its new price target for Ocado also reflects its anticipation for a deal being signed each year in its 10-year discounted-cash-flow.