Broker tips: Worldpay, Imagination, UK leisure
Berenberg downgraded Worldpay to 'hold' from 'buy' but lifted the price target to 450p from 327p following news on Tuesday that the payments processor has received preliminary approaches from Vantiv Inc and JPMorgan Chase Bank.
It said it was downgrading the stock as it reckons offers could reach its new target price.
The bank said it wasn't surprised by the interest shown or the timing of the bid, as it had already said that Worldpay would be the perfect target for a US acquirer.
It pointed out that both Vantiv and JPMorgan are suffering from excessive exposure to the offline US market, and Worldpay would give them international ecommerce capabilities that they would be able to cross-sell to their US client base.
Credit Suisse hiked its target price for Imagination telling clients its strategic assets should generate a good level of interest from bidders.
Analysts at the Swiss broker revised their target for the shares from 100.0p to 165.0p, explaining that the company's assets, especially around graphics, "should generate a good level of interest from bidders".
However, in the same research note the broker predicted Imagination's ongoing dispute with Apple would drive it into high losses.
Under the assumption that its sales to Apple are cut by 60% in fiscal year 2019 before falling to zero the following year, then the company would become unsustainable without external funding.
Analysts at Liberum initiated coverage on UK-listed leisure stocks at 'neutral' despite recent strong growth in the sector as leisure operators slowly filled the vacuum left by retailers on the High Street.
Over the past five years, spending on drinking and eating out had rise by 21%, versus just 10% growth for doing so at home.
Pubs were still the preferred leisure establishment, but consumers had increasingly more choice and more intense inflationary headwinds were creating "operational challenges" for some, they said.
Socio-political uncertainty and lower consumer confidence were also likely to lead to tighter family budgets.
Hence, the broker said it preferred those companies who were offering "structural growth plays", outsourcing and travel hubs rather than High Street, that is, and those with the greatest pricing power and best cost levers to pull-through innovation, scale or synergy.