Broker tips: Idox, Anglo American

11th Jul 2024 15:30

(Sharecast News) - Analysts at Berenberg initiated coverage on software specialist Idox with a 'buy' rating and 81.0p target price on Thursday, citing an attractive geo-spatial opportunity.

Berenberg said Idox management have completed the "walk, run, fly period" of the group's growth strategy, which has "significantly improved" the quality of the underlying business and repositioned it around high recurring revenue and higher growth verticals, most notably the geospatial opportunity.

"Management is now fortifying the foundations and focusing on and cultivating Idox's future trajectory. A number of acquisitions since 2021, most recently Emapsite, has created a platform to enable Idox to address the attractive geospatial opportunity," said Berenberg.

The German bank noted that its forecasts imply the business will deliver 7% adjusted earnings per share compound annual growth for FY24-26.

"Our FY24E adjusted EPS forecast is in line with consensus. In that context, we view 23.5x FY25E P/E as attractive, and we initiate coverage with a 'buy' recommendation and a price target of 81.0p, which implies 31% upside from the current share price," added Berenberg.

RBC Capital Markets downgraded Anglo American on Thursday to 'sector perform' from 'outperform' and cut the price target to 2,600p from 3,100p.

It said the impact from the fire at the Grosvenor mine remains unknown, but it expects the event to delay the ongoing sale of the met coal division, removing one of the key near-term catalysts from the investment case.

It argued that given the uncertainty associated with the fire, it is likely that potential buyers will want to wait for more clarity or request a discounted price.

RBC said Anglo could go ahead and sell the rest of the mines in the portfolio. However, Grosvenor and Moranbah North - which together represent circa 35% of the total volumes - share processing infrastructure, making a separate sale of these two mines difficult.

"Modelling a 12-month stoppage and $500m repair costs reduces our FY24-26e EBITDA and net asset value forecasts by -3%," RBC said.

"We reduce our valuation multiples to reflect the failed BHP bid and risks associated with the fire which moves our price target to 2,600p."

RBC said it sees the outlook as more balanced in the medium term, hence the downgrade.