Broker tips: Petrofac, M&G, St James's Place, Boohoo

(Sharecast News) - Analysts at Berenberg upgraded oilfield services provider Petrofac from 'hold' to 'buy' on Tuesday, stating the group was now "emerging into the light". Berenberg noted that after "a difficult few years", it believes that the outlook for Petrofac has finally started to "brighten" after an investigation by the UK's Serious Fraud Office had been hanging over the company for four years, hampering its ability to win new work.

However, the German bank stated that with this issue now settled, Petrofac had been reinstated on the bid list for the UAE, and it also expects the firm to be able to re-enter other markets over the coming months.

Berenberg, which lowered its target price on the stock from 250.0p to 210.0p, highlighted that this comes at a time when it expects spending and project awards to ramp up across the Middle East, helped by stronger commodity prices, which should enable "meaningful backlog growth" to return.

"While the market may want to see awards before pricing in a recovery, we believe that the company will reach its guidance of more than $4.0bn in revenue by 2025, leaving the stock trading on EV/EBITDA of 5.8x/5.0x for 2022/23E, respectively," said Berenberg.

HSBC upgraded its stance on shares of M&G and St James's Place on Tuesday as it took a look at UK wealth managers.

The bank said that following "underwhelming" performances in the last 12 months, current share price levels for asset managers were now attractive but said it was the "total capital returns or growth on offer" that were "most appealing", in its view.

HBSC lifted both M&G and SJP to 'buy' from 'hold', upping its price target on M&G to 260.0p from 220.0p but lowering SJP's price target to 1,600.0p from 1,650.0p.

"We see M&G offering very attractive total capital return yields at an average of 20% per annum over 2022-24, which correspond to the group returning circa 60% of its market cap to shareholders over three years," HSBC said.

"Although we expect limited growth in nominal operating earnings and capital generation, our forecast share buybacks mean that on a per share basis we see high-single-digit compound annual growth rates in these metrics and dividend per share over the medium term."

HSBC also added that in the case of SJP, double-digit growth rates on offer over the medium term were not currently being reflected in its share price.

Analysts at Deutsche Bank slashed their target price on clothing retailer Boohoo from 230.0p to 140.0p on Tuesday, stating the firm was set to see "more of the same".

Deutsche Bank said the focus at Boohoo, which will report full-year results on 4 May, will likely all be on guidance for the 2023 trading year, where it expects management to strike "a more cautious tone" with regards to both sales progression and margin recovery in the period.

From an investor standpoint, DB said this may increase the "nagging doubt" that the Boohoo margin will stay at a level similar to competitor Asos as it follows "a similar pattern" of internationalisation of its distribution centres.

While the German bank believes this is largely built into the stock's price, it noted a slowdown in sales growth may be "a bigger problem" as Boohoo has failed to achieve expected growth despite the current strong demand for occasion wear and going out dresses.

"We lower our earnings forecasts to reflect these concerns and our price target. We retain our 'buy' recommendation on significantly lowered forecasts and price target given the fundamental fair value but until Boohoo has its international distribution centres operational it may be hard for management to change the narrative," concluded Deutsche Bank.