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Broker tips: Whitbread, Tullow Oil, Asos

Fri 16 July 2021 15:04 | A A A

No recommendation

No news or research item is a personal recommendation to deal. Hargreaves Lansdown may not share ShareCast's (powered by Digital Look) views.

(Sharecast News) - Peel Hunt upgraded its stance on shares of Premier Inn owner Whitbread on Friday as it said the stock has been oversold on reopening fears.

The broker, which maintained its 3,600.0p price target, noted that Whitbread's share price has fallen along with other companies exposed to a prolongation of Covid-19-related disruption.

"It does look like it may have a tougher summer than we expected. However, its competitors are likely to do worse and it can use its very solid balance sheet to carry on investing and picking up attractive assets.

"With the EV having fallen to circa 11% below pre-Covid-19 levels and with undervalued, asset-rich, UK-listed companies being picked off by acquirers we upgrade our recommendation."

Analysts at Jefferies upgraded oil and gas exploration company Tullow Oil from 'underperform' to 'hold' on Friday following the group's successful debt refinancing.

Jefferies stated that Tullow's debt refinancing following the placing of its $1.8bn, 10.25% senior secured note due 2026 was done "without the equity dilution risk" it feared.

The broker noted that annual interest costs remained roughly $250.0m per year and added that evidence of production support from the first newly drilled production wells at the Jubilee field, due in the third quarter, would be "crucial".

Jefferies also upped its target price on the stock from 38.0p to 50.0p, citing "a supportive oil price" and adjustments for recent asset sales.

However, Jefferies also noted that Tullow had the highest cash breakeven in its coverage of over $50 per barrel of oil which, while covered currently, remained a concern for the analysts.

Analysts at Berenberg lowered their target price on fast-fashion retailer Asos from 7,000.0p to 6,700.0p on Friday following the group's recent trading update.

Berenberg stated that while Asos was still "relatively cautious" in regards to near-term trading, with its UK business continuing to prove "exceptional" and its recent deal with Nordstrom likely to provide a tailwind to US performance, it thinks the medium- to long-term equity story for the stock "remains attractive".

"Asos' shares were down by circa 18% on the day of results, which we think is largely due to the company's commentary that trading in the last three weeks of P3 was more muted in light of continued Covid-19 uncertainty and unseasonal weather," said Berenberg.

But the analysts pointed out that the two cited headwinds looked likely to reduce in the UK in the near-term, meaning it thinks upside risk still remained.

Berenberg also said cuts made to its earnings per share estimates for the stock were partly due to interest attached to Asos' £500.0m convertible bond.

    The value of investments can go down in value as well as up, so you could get back less than you invest. It is therefore important that you understand the risks and commitments. This website is not personal advice based on your circumstances. So you can make informed decisions for yourself we aim to provide you with the best information, best service and best prices. If you are unsure about the suitability of an investment please contact us for advice.