Broker tips: SIG, Tesco, HSBC

In a research report sent to clients, analysts Priyal Muljii, Glynis Johnson and Xavier Marchand too special note of the fact that it would the first trading update covering the first six months of any year from the insulation supplier since 2014.

That, they said, was part of new management's drive to provide greater detail and to update shareholders regularly.

Nevertheless, the company had already provided a fair bit of colour on recent trading in its most recent update on 11 May, so no big surprises were expected.

In terms of the bigger picture, the dominant theme continued to be the potential for a turnaround in the longer-term under the new management team.

Yet little was likely to be forthcoming on that subject on this occassion.

Shore Capital said it took note of improved recent trading at Tesco implicit in the latest Kantar data from Ireland, but said the time had not yet come to invest.

After years of challenging trading conditions on the Emerald Isle, good work on price and proposition had evolved from better volumes into positive sales momentum and greater market share.

"Ireland may have lost a lot of its margin lustre for Tesco but it remains an important market where profit progress would be welcome," the broker said.

Yet investors' skepticism regarding the potential from the "surprise" Booker merger, current leverage - especially the perceived drag from its pension responsibilities - and the more cautious sentiment towards the market leader since Amazon.com's decision to acquire Whole Food Markets were weighing on the shares, the broker told clients.

Berenberg downgraded HSBC to 'hold' from 'buy', saying the UK bank was now fully valued given the limited scope for higher profits and hence dividends - at the current point of the economic cycle - and its reduced cost of equity, but asserted that it will be one of the long-term winners in the sector.

However, its analysts kept their 12-month target price for HSBC's shares at 600p.

The German investment bank said HSBC's 7.0% market-implied cost of equity was too low, such that even assuming steady dividends in perpetuity the stock was "fully valued".

"If we assume zero growth in this capital return, which seems fair considering where we are in the long-term financial cycle, the market-implied cost of equity for HSBC is 7%. For us, this is too low, despite HSBC being a long-term winner."

Hence, it downgraded its recommendation from a 'buy' to a 'hold'. While many analysts have cited HSBC's weaker-than-expected revenue growth as a cause for concern, Berenberg suggested it was more a reflection of the lender's focus on risk - which is a good thing.