Broker tips: Legal & General, Softcat, Fresnillo

29th May 2024 11:44

(Sharecast News) - Deutsche Bank has reiterated its 'buy' call for financial services and asset management company Legal & General following news of a potential sale of Cala Homes.

It was reported on Tuesday that Persimmon was weighing up a £1bn bid for Cala, the housebuilder that Legal & General took full ownership of in 2018. It is thought that other competitors in the sector will likely consider bid ahead of a deadline at the end of this week.

"A potential sale would not be a surprise given we expect L&G's CEO to talk about streamlining the group with the capital markets day on June 10th," said Deutsche Bank in a research note on Wednesday.

"Overall, we see this as a positive, as it should provide optionality for growth and/or one-off capital return. As such, ahead of the CMD, we reiterate our positive thesis on L&G, which is a top UK insurance pick."

The bank noted that Legal & General's shares trade on an "attractive" dividend yield of 9% on 2025 estimates.

Analysts at Jefferies reiterated their 'buy' recommendation on shares of Softcat, following the latest trading update out of the IT infrastructure and services provider.

In it the company pointed to unchanged market conditions during its third quarter, which the analysts said were all that was needed to deliver fiscal year guidance.

Hence, their unchanged estimates, although rolling forward their discounted cash flow model forward led them to revise their target price from 1,800.0p to 1,950.0p.

Nonetheless, management's update also implied that the green shoots of an end-market recovery remained just that - green shoots.

Analysts at JP Morgan sounded a confident note on the outlook for precious metals miner Fresnillo ahead of the next presidential elections in Mexico.

The latest polls were showing a wide roughly 20 percentage point lead for Claudia Sheinbaum, the candidate for the Morena coalition, over her rival Xochitl Galvez.

However, the analysts believed the outcome would be "marginally more balanced" than polls suggested.

"Thus, in a scenario of narrower victory, we could see a stronger system of checks & balances as it requires two-thirds majority in Congress to pass constitutional reforms," they said.

"Thus, we see relatively lower risks of legislation or constitutional changes which could be negative for miners or pose potentially negative implications for mining investment compared to previously."

As well, year-to-date gold and silver price gains of 14% and 34%, respectively, meant that Fresnillo shares were offering a mark-to-market upgrade on its earnings before interest, taxes, depreciation and amortisation of more than 20%.

They were also changing on hands on 5.0 and 4.4 times, respectively, their sport EV/EBITDA multiples for 2024 and 2025, compared to a mid-cycle average of approximately.

The analysts also referenced their recent decision to revise their long-term price forecast for gold from $1,600/oz. to $1,800/oz..