Broker tips: StanChart, BHP Billiton, Dixons Carphone
With Standard Chartered's strategy gaining momentum, analysts at Berenberg saw fit to reiterate their 'buy' stance on the firm on Friday, highlighting top-line growth above the lender's medium-term guidance and its "largely-unique global network" as evidence of the bank's ability to turn a solid performance "where it matters".
Standard's revenue growth moved above its 5-7% medium-term guidance during the first quarter, rising by 10% when adjusted for extraordinaries, something the broker said demonstrated the value of StanChart's unique global network and suggested that its renewed external focus was succeeding in deepening client relationships, despite the bank's continued efforts at de-risking.
In particular, Berenberg also expects to see strong transaction banking revenues from Standard of 10% annually, stoking its top-line growth.
While near-term cost pressures had risen, the broker was adamant that Standard could extract "material long-term cost efficiencies".
Discussing the recent revelation by the lender that its fiscal year 2018 costs may exceed levels seen last year, creating a modest near-term headwind, analysts at Berenberg noted that, "considering longer-term tailwinds from the bank levy and potentially lower regulatory costs, we believe inflationary pressure can be meaningfully offset."
Berenberg reiterated its 'buy' rating and 920p price target on Standard, stating it believed the bank's capital strength could comfortably support a dividend payout of around 50%.
Barclays analysts upgraded BHP Billiton’s rating to 'overweight' on Friday and reduced that of Rio Tinto to 'equal weight', citing an expectation that BHP will close ground on Rio Tinto following five years of underperformance.
In a research note sent to clients, Barclays said the driving factor is the projected monetisation of BHP’s US shale acreage, with potential upside depending on valuations attributed to the Permian Basin acreage in particular.
Dixons Carphone rallied on Friday as RBC Capital Markets reiterated its ‘outperform’ rating on the stock and bumped up the price target and estimates on expectations of a strong fourth quarter and good momentum into the new financial year.
RBC said the new management team is likely to speed up decision making and improve the customer offer.
"New CEO Alex Baldock (ex Shop Direct) has recently started and has put in place a new senior executive team designed to speed up decision making in the business, cut out unnecessary layers of management and improve the customer offer for instance by improving data analytics and mobile conversion," RBC said.
In addition, it reckons post-Brexit currency headwinds have subsided. It noted that Dixons has suffered from manufacturers raising prices aggressively following the devaluation of the pound in 2016 but said this has now annualised and it’s seeing more competitive prices coming through in areas like laptops and iPads, which should be helpful for volumes.