Broker tips: Admiral, Derwent London, Segro

22nd Aug 2024 15:46

(Sharecast News) - Jefferies upgraded Admiral on Thursday to 'hold' from 'underperform' and lifted its price target on the stock to 3,025.0p from 2,300.0p as it upped its earnings per share forecasts.

It said Admiral "materially exceeded" expectations on both growth and margin at the first-half results, leading it to increase its EPS forecasts by 20%/28% for 2024/25.

"Whilst prior underwriting years continue to impact earnings, this has been more than offset by very strong current year underwriting performance, demonstrating Admiral's resilient business model," Jefferies said.

Jefferies said insurance revenue in the first half was 18% higher than it had forecast, driven by very strong turnover growth, while the core motor loss ratio (before reserve releases) also improved significantly to 75% from 87%.

"Given the competitiveness of the UK motor insurance market, Admiral's strong growth combined with strong margin improvement in H1, is particularly impressive in our view," it said.

Analysts at Berenberg raised their target price on property investment and development business Derwent London from 2,494.0p to 2,700.0p on Thursday, stating the group's improving outlook should drive performance.

Berenberg stated that while Derwent's portfolio fell in value in H124, the rate of decline had slowed, with the expectation now that values will stabilise over the next six months given base-rate cuts and rent rises due to an improving economic outlook and a continued supply/demand imbalance for prime London offices.

"Along with the rest of the UK REIT sector, Derwent London's share price has recovered since its low in February/March, but still shows a broadly flat performance year-to-date," said the German bank., which reiterated its 'buy' rating on the stock.

"However, its discount to NTA rating has narrowed marginally as NTAs have declined. Given we are only forecasting a further 1% NTA decline in H224, we think the current NTA discount rating of 23% is the actual discount now, and with our expectation for growth over the coming few years, we forecast this to narrow further to 15%.

JPMorgan Cazenove upped its price target on Segro on Thursday to 1,050.0p from 1,000.0p as it reassessed the outlook for the company following first-half results.

The bank said it was flexing its assumptions on four key variables - capital growth, rental growth, development activity and marginal debt costs - driving a 'Blue Sky' scenario that implies 42% upside potential.

"We contrast the relative valuation of Segro to the UK Super Six and consider the outlook for values and rental growth," it said. "Utilising CoStar data we also look at underlying conditions in key Segro locations including Slough, The Midlands and Park Royal and show how listed real estate is becoming a low(er) risk play across equities again."

JPM also maintained its 'overweight' rating on the stock.