Broker tips: Energean, Auction Technology, Domino's Pizza

16th Jul 2024 15:42

(Sharecast News) - Analysts at Berenberg lowered their target price on exploration and production company Energean from 1,565.0p to 1,305.0p on Tuesday following the group's disposal of assets in Egypt, Italy and Croatia.

Berenberg stated that the deal was done at a significant uplift from the price that Energean paid for the assets in 2020 of $5.40 per barrel of oil, versus $1.20 in 2020, and was positive on this basis.

The German bank, which has a 'buy' rating on the stock, noted the deal was expected to close by the end of 2024 and should also enable payment of roughly $200.0m special dividend and repayment of $450.0m of bond debt.

However, a lower overall contingent resource base means that Berenberg now models a reduced risked net asset value and price target. It also slightly tempers its medium-term dividend modelling to ensure that net debt/underlying earnings metrics remain on track to reach the company's target of 1.5x, but continue to forecast a healthy long-term dividend yield of 14%.

"Based on our pro-forma numbers, our FY25 production and revenue forecasts are down 27% and 25% respectively, with EBITDA and EPS down 23% and 22%, respectively. FY25 FCF is reduced by 31% and net debt by 9%. Our FY25 DPS is unchanged but is then flat beyond that - resulting in an 18% DPS forecast reduction in 2026 versus our previous forecasts," said Berenberg.

RBC Capital Markets started coverage of Auction Technology on Tuesday with a 'sector perform' rating and a 540.0p price target.

The Canadian bank said data suggests asset values in Industrial & Commercial continue to weaken. RBC forecasts 0.8% organic growth for FY24, below the guided 2-5% range.

"The recent sell-down from TA Associates has compounded concerns, and delivery of any organic growth in FY24 would likely be well received," it said. "In the mid-term, ATG retains strong market positions and small gains in the group's KPIs could potentially drive material upside."

RBC noted the shares are trading at their lowest EBITDA multiple since the IPO and said its multiples-based valuation drives its price target, which supports a 'sector perform' rating.

RBC Capital Markets also started coverage of UK-listed Domino's Pizza Group with an 'outperform' rating, hailing the appointment of a new chief executive along with the company's numerous opportunities to drive order growth.

RBC, which has a 400.0p target price, said that Domino's Pizza Group could be a "different business in two-three years' time", and that the current valuation doesn't reflect the potential of its core operations.

The broker also highlighted the company's plans to drive order growth, saying that increased app and marketing personalisation, along with the proposed loyalty scheme, will "boost order frequency and re-invigorate the dormant customers that app data reveals".

RBC said there's also the potential for the launch of a second brand, which would be "backed by some of the UK's most successful franchisee entrepreneurs and facilitated by the scale of the plc".

Reporting by Iain Gilbert at Sharecast.com