Broker tips: Acacia Mining, Foxtons, Weir Group
Acacia Mining was under the cosh on Friday after Canaccord Genuity cut its rating on the stock to 'sell' from 'hold' but lifted the target price to 505p from 495p.
Acacia Mining
234.00p
16:45 16/09/19
Foxtons Group
51.60p
16:40 19/04/24
FTSE 250
19,391.30
17:09 19/04/24
FTSE 350
4,341.08
17:09 19/04/24
FTSE All-Share
4,296.41
17:08 19/04/24
FTSE Small Cap
6,331.12
17:04 19/04/24
Industrial Engineering
13,663.38
17:10 19/04/24
Mining
10,765.51
17:10 19/04/24
Real Estate Investment & Services
2,135.62
17:09 19/04/24
Weir Group
1,980.00p
17:15 19/04/24
Canaccord said the miner has performed well since reporting disappointing 2015 results, particularly in the second quarter.
The company now expects gold production at or above the upper end of its 750-780,000 ounce (oz) guidance range, and All-in Sustaining Costs (AISC) at the lower end of its $960-980/oz range. Canaccord expects 794,000oz and $944/oz.
The broker has also upgraded its 2016 EBITDA estimate from $351m to $419m and earnings per share forecast from 35c to 41c.
Canaccord noted recent reports that have suggested that Barrick Gold Corp was looking to sell its stake in Acacia. But the broker believes Acacia is "too expensive" given a challenging market for gold miners.
"With a share price of almost 600p, and an upwardly revised target price of only 505p, and with little prospect of a near-term sale of Barrick's 63.9% stake in our view, we downgrade our recommendation from 'hold' to 'sell'. We like what the company has achieved so far this year, but believe that it is more than in the share price already."
Foxtons shares were under pressure on Friday as Numis cut is full year earnings forecast after the real estate giant reported 42% drop in first half profit.
Pre-tax profit fell to £10.5m in the six months to the end of June from £18.1m the same period a year earlier. Revenue dropped to £68.8m from £71.1m. Adjusted earnings before interest, tax, depreciation and amortisation was £13.1m, down from last year’s £20.5m.
Foxtons blamed the uncertainty leading up to the European Union referendum on 23 June and the slowdown in sales following higher stamp duty charges on second homes and buy-to-let properties from 1 April.
"Uncertainty surrounding the EU referendum led to slow residential property markets in London during the first half of the year,” said chief executive Nic Budden.
“Although we achieved a Q1 revenue record due to a surge in property sales transactions in March ahead of the introduction of the stamp duty premium for buy to let properties and second homes, Q2 experienced a sharp contraction and we believe that the overall level of property sales transactions made in London during the first half of the year is substantially down on last year.”
Numis said Foxtons first half results are in line with the update given at the end of June. The broker now expects full year EBITDA of £27.4m, compared to a previous forecast of £30m.
However, Numis issued an ‘add’ rating from a previous ‘suspended’ and reiterated a target price of 145p, saying Foxtons is in a good position to weather a slowdown in the London property market.
“Whilst it is difficult to predict the future trends in the London housing market, Foxtons remains highly cash generative and we believe it will benefit when London sales volumes do recover from the current low levels,” Numis said.
It added: “We have set our target price based on a 6% yield for 2016, which should benefit from cost cutting and lower cap-ex and we believe the shares can move meaningfully higher once uncertainty lifts and volumes recover.”
Weir Group’s shares fell on Friday as Canaccord Genuity cut its rating on the stock to ‘sell’ from ‘hold’ and lowered the target price to 1,250p from 1,325p.
The downgrade came as the engineering giant announced that chief executive Keith Cochane is stepping down and reported a drop in first half pre-tax profit.
Cochrane, who leaves the company after 10 years on the board, will be replaced by group finance director Jon Stanton on 1 October 2016.
The firm posted a 25% fall in pre-tax profit to £82m in the six month to 30 June 2016 on a reported and constant currency basis. Revenue declined 12% on a reported basis and dipped 13% at constant currency to £866m as weak oil prices hurt the Oil & Gas business. Earnings per share was down at a reported 23% to 29.6p.
“The departure was perhaps the most significant event of otherwise very solid 1H results, with Weir reporting a c.20% drop in earnings (around 9% ahead of consensus) on lower-than-expected losses in the Oil & Gas operations and better-than-expected earnings in the larger Minerals division,” said Canaccord analyst Alex Brooks.
“Importantly, management is realistic on the outlook, eschewing any increase in the guidance for this year, despite better-than-expected 1H results.”
The analyst said Weir has had an impressive run over the past six months and stands to benefit from a weaker pound, like other UK exporters. Brooks said it is also “impressive” that the company has managed to hold losses in its Oil & Gas operations to such a low level and that the the Minerals division has a robust market position that “even in a softer end market will likely deliver decent results”.
However, Brooks added: “On our estimates the forward price to earnings ratio is now as high as at any time in the past 10 years, there remains the distinct risk that the underlying markets do not recover at anything like the rate that our forecasts assume that they will, and at current levels of profitability the balance sheet is far less rosy than would have been thought only two years ago.”