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(Sharecast News) - Berenberg started coverage of real estate advisor Savills on Wednesday with a 'buy' recommendation and 1,375p price target as it highlighted the company's "misunderstood earnings quality".
"While investor perceptions typically recollect Savills' more cyclical prime residential estate agency business (which now equates to just 12% of group adjusted profit before tax), we believe the market fails to appreciate it has built a highly recurring, less transactional business over recent years, which contributed over 70% of FY25's adjusted PBT," said Berenberg.
Alongside this, Savills' more cyclical transaction advisory business was currently demonstrating a positive recovery, Berenberg said, as interest rates continue to moderate and global investment volumes rebuild.
"The recently announced transformational acquisition of Eastdil Secured (Eastdil) brings a step change in Savills' growth, enhancing its presence in the US and capital markets advisory, and is set to increase earnings per share by 17% in FY27, based on our forecasts," it said. "Trading on just a FY27 P/E of 9.0x or 5.2x EV/EBITDA, despite an EPS compound annual growth rate of 15% (FY25- 28), we view the shares as clearly mispriced."
Berenberg said its target price offers 54% upside.
Analysts at Berenberg also cut their target price on BP to 590p from 600p on Wednesday, saying the energy giant's latest trading update pointed to weaker upstream performance and higher exploration writeoffs, despite another exceptional quarter from the downstream business.
BP's Q2 statement, published on 14 July, indicated an earnings beat driven by strong refining and marketing margins and a further standout contribution from oil trading. Berenberg said cash generation also looked solid, even with a workingcapital build, and noted good progress on deleveraging, with net debt before leases guided to fall to $22bn to $23bn, down $2.8bn quarteronquarter.
Downstream performance was described as "strong", with refining margins jumping to $29.60 per barrell from $16.9/bbl in Q1, adding $1.2bn to $1.4bn to earnings. Throughput was guided 4% lower due to turnarounds and an incident at BP's Whiting refinery, while oil trading was set to be slightly higher quarteronquarter. Berenberg said its updated estimates put it 60% ahead of consensus for the division.
Upstream results, however, were more mixed. Gas and low carbon energy was set to benefit from higher commodity prices, with realisations adding $500m to $700m, though production was expected to be 5% below Q1. Oil production and operations would also gain from higher oil prices, with realisations adding $1.8bn to $2.1bn, but exploration writeoffs were guided to come in at $500m, up from near zero in Q1. Production was expected to be 7% lower due to the Iran conflict.
The German bank lifted its earnings forecasts by 9% for FY26 and 1% for FY27 on stronger refining, but said the upstream drag justified trimming the price target to 590p. Berenberg also maintained its 'buy' rating.