Broker tips: JTC, Close Brothers, housebuilders

(Sharecast News) - Analysts at RBC Capital Markets lowered their target price on fund management services firm JTC from 820.0p to 760.0p on Thursday as it took a fresh look at the stock following the group's full-year results. RBC stated it had made minor changes to forecasts on the back of the group's in-line full-year and opted to lower its target price in order to reflect higher discount rates.

"JTC continues to grow strongly, although is becoming a more diverse outsourcing business, whilst ROIC has been impacted by recent M&A," said the Canadian bank, which reiterated its 'sector perform' rating on the stock.

"We remain positive on the structural growth potential, as well as the high margins and strong cash generation. In our view, JTC is well positioned given its unique ownership model and jurisdictional reach. We continue to believe consolidation will be a major theme and expect JTC to continue to play its part, although M&A prices, especially in the alternatives segment, remain high and there are risks in terms of integration and overpayment. We continue to see the shares as fair value at these levels."

Analysts at Berenberg lowered their target price on financial services company Close Brothers from 1,200.0p to 1,150.0p on Thursday but said the group was "closing issues and opening pipelines".

Berenberg said Close Brothers has confronted "cyclically lower" securities dealing revenues and slowing asset management growth during the past 18 months, alongside elevated costs from the closure of its litigation finance business.

However, the analysts said the "perfect storm" was now clearing, with residual risks from Novitas now "modest", following large provisions recognised in the first half.

The German bank also highlighted that it now expects Close Brothers' lending pipeline to enable an acceleration of loan growth to roughly 5% annually.

"Trading on 1.0x total book value, we, therefore, believe Close Brothers remains undervalued. Our 1,150.0p price target would value the company on 1.2x TBV and implies circa 30% upside to the current share price," said Berenberg, which reiterated its 'buy' rating on the stock.

HSBC upgraded its stance on a host of housebuilders on Thursday as it argued that a downturn in the housing market and tepid recovery in return on invested capital are more than priced in to the shares.

The bank upgraded Barratt, Bellway, Crest Nicholson, Persimmon, Redrow and Taylor Wimpey to 'buy' from 'hold', while their target prices were lifted to 570.0p from 390.0p, to 2,700.0p from 2,030.0p, to 270.0p from 230.0p, to 1,550.0p from 1,410.0p, to 670.0p from 500.0p, and to 150.0p from 105.0p, respectively.

HSBC also upgraded Berkeley to 'hold' from 'reduce' and hiked its target price to 4,000.0p from 3,000.0p and, finally, reiterated its 'buy' rating on Vistry and hiked its price target on the stock to 1,060.0p from 900.0p.

"We now have greater visibility about the shape of the current housing market downturn for the housebuilders' profits and cash flows and their recovery from it, which we believe to be more than priced-in to share prices," HSBC said.

HSBC said its preferred picks, with more than 30% implied average upside, out of its seven buy-rated stocks are partnerships play Vistry, Redrow and national volume builder Taylor Wimpey, all of which trade at large discounts.

"Dividend yields are attractive across the sector, averaging 5.4% to 8.1% in 2023-27e, whilst we see material additional surplus capital potential for Redrow and Persimmon, assuming no year-end indebtedness including land creditors," it said.