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Broker tips: Asos, Cobham, Inmarsat

By Alexander Bueso

Date: Monday 20 Jun 2016

Broker tips: Asos, Cobham, Inmarsat

(ShareCast News) - RBC Capital Markets reiterated its 'outperform' stance and 4,500p price target on online fashion retailer ASOS, saying the recent share price weakness was a buying opportunity.
The broker noted the shares have dropped more than 10% over the last month, most likely on concerns over Amazon's push into fashion and uncertainty ahead of the EU referendum.

"We think the Amazon threat is overstated and believe that ASOS's trading remains strong, particularly in the UK where we expect further market share gains," RBC said.

In addition, it said the market underestimates the growth opportunity in the US where proposition enhancements are already visible. It expects underlying US revenue growth to accelerate next year as recent improvements made to the US customer proposition begin to yield top-line upside.

Aerospace and defence group Cobham got a boost on Monday as Bank of America-Merrill Lynch upgraded the stock to ' buy' from 'neutral' noting the balance sheet was reset and the valuation is attractive for a defence asset.

BofA ML pointed out that Cobham has completed a rights issue of around £500m, bringing the leverage to a much healthier 1.9x net debt EBITDA by year end FY16, putting the bank's previous concerns about leverage to rest.

It argued that commercial growth remains a concern but said Cobham has a well-positioned defence portfolio, and it expects modest organic improvements in both the US and non US defence exposures.

Citigroup upgraded Inmarsat to 'buy' from 'neutral' saying it was oversold and Brexit resistent, and lifted the price target to 900p from 880p due to the new GBP/USD exchange rate.

The bank noted Inmarsat has fallen 34% in sterling over the last six months.

"We believe this is overdone and was partly, at least, due to the compounding of having its principal market (Maritime) going into a severe recession just as Inmarsat commenced its product migration to GlobalXpress (GX), coinciding with management deciding to advance the capex cycle for its next generation of satellites."


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