Broker tips: Close Brothers, Bunzl

29th Aug 2024 14:17

(Sharecast News) - Close Brothers surged on Thursday as RBC Capital Markets upgraded the shares to 'outperform' from 'sector perform' and hiked the price target to 620.0p from 375.0p, citing a number of potential catalysts.

The bank argued that whether you are looking at historical or sector-relative valuation, Close Brothers shares screen as cheap and noted that the shares have underperformed the sector by around 55% year-to-date.

RBC said the bad news around the Financial Conduct Authority's review of motor finance is now well embedded into consensus and net interest margin and loan growth assumptions are sensible.

"Therefore, we currently see asymmetric risk to the upside, as the market continues to myopically focus on capital, while we see a number of potential catalysts including: i) a softening of Basel 3.1; ii) a Novitas settlement; iii) IRB approval," it said. "Structurally, it is helpful that CBG's NIM is relatively agnostic to a falling rate environment."

RBC Capital Markets also upgraded Bunzl on Thursday to 'sector perform' from 'underperform' and lifted its price target on the stock to 3,350.0p from 2,700.0p as revenue headwinds ease.

"After a period of deflation-linked underperformance, we raise our rating to SP to reflect, principally, a brighter revenue and margin outlook, confidence around M&A execution and a new capital allocation strategy which we think widens the investor audience," RBC said.

The Canadian bank, which said the price target increase reflects the value of future M&A, also said it was lifting its FY24 and FY25 earnings per share estimates by around 2% and 4%, respectively, to reflect stronger assumed margin progression, incremental M&A and around £450m of planned share buybacks.

"Though we believe BNZL will remain a 'sleep tight at night' stock for longer-term investors, we currently prefer DCC and RS1 in the B2B distribution sub-sector," it said.