Broker tips: Synthomer, Beeks Financial Cloud

14th Aug 2024 14:58

(Sharecast News) - Analysts at Berenberg lowered their target price on chemicals company Synthomer from 375.0p to 340.0p on Wednesday after the group's interim earnings "delivered both grounds for hope and reasons for caution".

Berenberg stated on the one hand, the two units with the most scope for improvement - adhesives and nitrile - drove year-on-year increases in the underlying earnings of their parent segments.

"Due to a combination of restocking, self-help measures in adhesive solutions and improving volumes in nitrile latex supported results, volumes at the group level rose by circa 10% year-on-year, comfortably ahead of peers such as BASF," said Berenberg, which added that spreads in nitrile latex also appeared to have expanded during Q2.

On the other hand, the German bank, which has a 'buy' rating on the stock, noted that construction demand was subdued, leverage high at roughly £560.0m and said that generating positive free cash flow after a £31.0m negative result in H124 may prove difficult on a full-year basis.

However, Berenberg believes the nitrile recovery should shield the stock from macro headwinds in H224, and noted that few peers were as exposed as Synthomer to eventual macro recovery.

Canaccord Genuity stood by its 'buy' rating and 260.0p target price on software and services firm Beeks Financial Cloud on Wednesday following a fresh update from the group.

Canaccord Genuity said Beeks' recent trading update suggested imminent newsflow on its large Exchange Cloud deal announced in February and today, the company reported it had received regulatory approval for the offering and plans to announce details jointly with the customer of the platform available for deployments in due course.

"We estimated that US exchanges generate several hundred million USD in revenues from colocation - leasing out space and power in their data centres next to their trading engines. This creates a large incentive for them to grow this revenue stream and leverage Exchange Cloud, though the pace of the demand ramp-up and ultimate recurring revenue opportunity for Beeks will largely depend on successful end-customer uptake," said the Canadian bank.

"In this context, Beeks indicates that the initial deployment of services to this customer has commenced and supports the board's FY25 expectations. We continue to believe that successful sales execution and uptake of the new offering by this large exchange's customer base could create material upside to our forecasts."

Reporting by Iain Gilbert at Sharecast.com