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Broker tips: ConvaTec, Anglo Pacific, Berkeley Group

By Iain Gilbert

Date: Monday 09 Dec 2019

Broker tips: ConvaTec, Anglo Pacific, Berkeley Group

(Sharecast News) - RBC Capital Markets downgraded its stance on shares of medical products and technologies company ConvaTec to 'sector perform' from 'outperform' on Monday, cutting the price target to 197p from 210p following recent share price strength.
The bank noted that the stock us up 38% in the past six months and advised investors to take profits after a "strong" third quarter.

RBC said the company's third-quarter results drove outperformance of the shares from a low base, with the group's Q3 organic growth the highest in three years and all divisions showing good growth.

However, it noted that ConvaTec cautioned that the fourth quarter will be tougher.

"Tailwinds in Q3 (easy comps and distributor inventory movements) are not expected to repeat, while management expects that Q4 will see some impact from SKU rationalisation, destocking and ID division lumpiness," it said.

Analysts at Berenberg lowered their target price on mining firm Anglo Pacific on Monday, noting some investors appeared to be concerned about the company's ability to match the production growth and increased royalty payments stemming from its Kestrel mine.

Berenberg, however, said it was "more confident" about management's prospects, as its growth scenarios showed that the rising Kestrel income and Anglo Pacific's recent acquisitions of LIORC and Mantos should help unlock an ability to finance growth with only limited equity issuance out to 2025.

For so long as the company prioritises the acquisition of royalties that are already in production it should also be able to continue to maintain or increase the dividend, alongside delivering growth, noted the analysts.

"We have updated our valuation and forecasts to reflect the recent drops in coal prices, lower iron-ore pellet premiums, lower vanadium prices and forex movements," said Berenberg - which cut its price target on Anglo to 213p from 235p but kept its 'buy' rating unchanged.

Analysts at Canaccord Genuity downgraded their recommendation for shares of Berkeley Group Holdings on the back of the recent run-up in the share price "against a less attractive risk/reward ratio".

The most important driver of the homebuilder's performance going forward would be the outcome of the general election and its impact on political stability and policy, analyst Aynsley Lammin said in a research note sent to clients.

"A good outcome could result in improving confidence and a better London housing market. The group is well-positioned, in our view, to take advantage of how the macro and housing backdrop develops from here," he explained.

Despite that, said Lammin: "Over the long term, the group remains an impressive deliverer of shareholder returns. In the near term, given the recent run in the share price and less compelling valuation, we downgrade to a 'hold' (from 'buy') against a less attractive risk/reward ratio."

Lammin did, however, hike his target price on the shares from 3,850.0p to 4,570.0p.


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