Broker tips: Dalata Hotel Group, DS Smith

4th Sep 2024 15:13

(Sharecast News) - Analysts at Berenberg lowered their target price on hotels operator Dalata Hotel Group from 510.0p to 480.0p on Wendesday but applauded the group's "resilient H1 performance".

Berenberg said Dalata had delivered a solid H124 performance, with top-and-bottom-line growth despite a weaker market backdrop and inflationary pressures.

Although Berenberg noted that July and August had been "slightly weaker" than the company expected and, as a result, brought down its estimates, it also said the medium-term outlook remained robust and said the company continued to be "a very cash-flow generative business", as evidenced by a new €30.0m buyback.

Looking ahead, the German bank said it remains confident in Dalata's ability to deliver on its outlook and medium-term growth strategy, leading it to reiterate its 'buy' rating on the stock.

Stifel downgraded DS Smith on Wednesday to 'hold' from 'buy' and cut its price target on the stock to 480.0p from 498.0p as it said the company's near-term earnings were under pressure.

"We lower our 2025-27 EBITDA by an average 2.4% on a less robust volume recovery and faster-than-expected containerboard price increases," Stifel said, as its FY25 EBITDA estimate was cut by 4.2%, and its EPS estimate was lowered by 7.6%.

Stifel said that while rising containerboard prices will ultimately be reflected in higher box prices, its up-front downgrade reflects the lag of passing on increased containerboard prices to corrugated.

"We maintain our view that a merger with International Paper is good value for DS Smith and expect the deal to be approved at upcoming shareholder votes," it said. "However, in the past three months (from last Friday close) the DS Smith shares have gained 27% versus IP up 7% (S&P 500 +7%, FTSE100 +1%)."

Stifel noted that three months ago, DS Smith shares were pricing in a risk that the deal wasn't going to materialise, but with Suzano pulling away from a potential bid for IP, the shares surged and, it believes have largely closed the arbitrage gap versus IP.