Broker tips: UK lenders, Clarkson, UK Asset managers
Barclays' analysts sounded a relatively confident note on the outlook for the main UK lenders despite the added uncertainty from renewed Covid-19 restrictions.
"Renewed restrictions add to an uncertain near-term outlook for UK banks," they said in a research note sent to clients.
However, while they lowered their estimates for bank earnings in 2021, those for 2022 were unchanged.
They also marked up their target prices for all the lenders mentioned in the same note.
In the case of Lloyds, they said that they were now in-line with the company compiled consensus estimate for earnings per share and 10% below it in the case of Natwest.
"We remain constructive in the medium term given a likely H2 economic recovery, improving profitability, rebuilding capital distributions, strategic actions, and undemanding valuations," they added.
Thus, their recommendation for Lloyds was unchanged at 'overweight', with the analysts further pointing out that the shares were trading on eights times' Barclays' 2022 estimate for its EPS.
European banks were changing hands on an average EPS multiple of 9.5 times while Virgin Money UK and One Savings Bank were on a multiple of about six times.
On HSBC and StanChart on the other hand, Barclays said it was "cautious" as their shares were on 11.5 an 10.0 times the broker's 2020 EPS estimates, respectively.
Barclays revised its target price for HSBC from 380.0p to 400.0p (Underweight), from 100.0p to 130.0p for Metro Bank (Underweight), from 150.0p to 165.0p for Natwest Group (Equalweight), from 460.0p to 500.0p for OneSavingsBank (Overweight), from 410.0p to 420.0p for StanChart (Underweight) and from 165.0p to 170.0p for Virgin Money UK (Overweight).
JPMorgan Cazenove downgraded its stance on shipping services company Clarkson to ‘neutral’ from ‘overweight’ as it took a look at the European logistics sector.
JPM said the downgrade mainly reflects a lack of catalysts, ongoing optically high valuation and difficult near-term comparatives.
"Our forecasts are upgraded 5% for FY20 and downgraded circa 7% thereafter, reflecting a combination of weaker freight rates and the stronger GBP, which is a transactional headwind for Clarkson," it said.
JPMorgan also lifted its price target to 2,960p from 2,920p.
In the same note, it recommended Maersk and Royal Mail as its top picks.
JPM said Royal Mail's trading has benefitted materially from stronger parcel volume, improving the medium term revenue outlook. "The recent union agreement has also removed a major overhang," it said, adding that the UK business currently being valued at around 3-4x EBIT "seems harsh".
Analysts at JP Morgan reiterated their 'underweight' stance on shares of asset managers Ashmore and Hargreaves Lansdown, arguing that their valuation premium versus peers was too generous.
Nonetheless, they revised higher their medium-term estimates for earnings per share in the sector on the back of the strong end to 2020 in financial markets.
Marking-to-market their EPS estimates for 2020-22 were bumped up by roughly 2.8%, 2.7% and 2.8%, respectively, although their projections for flows were "largely unchanged".
Indeed, they also stayed at 'overweight' for Amundi, DWS, Man Group, Intermediate Capital Group and Quilter.
In the case of Ashmore and Hargreaves Lansdown on the other hand they believed that the "extent of the premium valuations vs. the sector as less than fully justified", although market trends were expected to remain supportive.
Linked to the above, they lifted most of their target prices for the UK listed asset managers in their coverage, with that for Ashmore rising from 385.0p to 415.0p, for Hargreaves Lansdown from 1m390.0p to 1,450.0p, for Quilter from 180.0p to 186.0p, for Jupiter Fund Management from 310.0p to 330.0p and for Man Group from 150.0p to 170.0p.