Source: Sharecast
JPM noted the shares have underperformed materially year to date, as a function of IHG's US exposure, FX, and a softer core underlying momentum in part triggered by a weaker revenue per available room across key geographies of the US, China and UK.
Going forward, with RevPAR expectations now rebased, JPM expects the narrative to turn more constructive, gradually pivoting towards IHG's superior earnings visibility, high free cash flow conversion, allowing for circa 5% of shares repurchased annually, and execution.
"With IHG's pipeline at 34% of its existing footprint (high end of its typical 30-35% range) and sound progress in sight on the net unite growth front as a result, we would expect IHG's valuation premium to persist, in line with US peers (solid business structurally with sound earnings visibility and margin upside, scarcity of quality alternatives within Consumer)," it said.
Berenberg has hiked its target price for Babcock from 1,360p to 1,440p and reiterated a 'buy' rating on the stock after raising estimates for the defence engineering business after this week's positive AGM update.
Reporting on trading over the first five months of the financial year, Babcock said on Thursday that the strong momentum in the Nuclear division was continued – the unit delivered double-digit revenue growth over the past three years – driven by both civil nuclear and submarine activity.
"This bodes well for profitability, as Nuclear is the highest margin division, in our view," Berenberg said.
Meanwhile, the company has secured several contract wins and additional strategic partnerships during the period, the broker highlighted.
"We continue to view the company’s medium-term group mid-single-digit revenue growth guidance as conservative, set against the GBP16bn shipbuilding pipeline and a multitude of partnerships formed with other defence companies. We estimate 10% upside to our FY30 revenue estimate from these partnerships alone," Berenberg said.
The German bank pointed out that Babcock's peers trade at higher valuation multiples, and shares should re-rate to trade in line with the sector.
Analysts at Canaccord Genuity have hiked their target price on exploration and production firm Seplat Energy from 465p to 550p following the firm's capital markets day on 18 September.
Canaccord Genuity said on Friday that Seplat now has a new set of aspirational 2030 targets, alongside a new offshore licence CPR, which sees "a significant upgrade" to the firm's 2P reserves and 2C resources.
Seplat currently sees roughly 200,000 barrels of oil equivalent production per day by 2030, up from 134,000 in the first half, and the potential for further growth beyond that.
"This level of growth is to be fuelled by $2.5-3bn of capex deployed over the next five years, targeting new opportunities in its offshore licences from idle well restoration, infill drilling, satellite discoveries, and connecting new gas sales routes," noted Canaccord, which reiterated its 'buy' rating on the stock.
"All this while reducing opex to sub-$10/bbl by the end of the decade (guidance: cumulative $3-4bn opex). These production levels and cost improvements are expected to drive a cumulative $5-6bn of cash flow from operations and $2-3bn of free cash flow, similar to what the company has achieved in the 9 years since IPO."
Canaccord also said Seplat's new CPR comes with "some significant upgrades" to both 2P reserves and 2C resources related to the offshore assets, and highlighted that the firm's new formalised dividend policy reflects its confidence in cash flow generation throughout the cycle. Seplat expects to distribute a cumulative $1bn by the end of 2030, roughly 60% of its current market cap.
Alongside the "excellent presentation, uprated guidance, and upbeat projections", Seplat announced that it was in discussions with Nigeria's national petroleum company to sell a 10% working interest of the offshore SEPNU assets to NNPC.
"We have updated our model to reflect the new guidance and reserves & resources estimates. However, we also take into account the potential for lower working interest in the offshore SEPNU operations. As such, we see an 18% increase to our risked NPV12.5 valuation of Seplat to 548.9p (922p unrisked) from 467.6p. On the back on this valuation upgrade, we increase our Seplat Energy target price to 550p (+18%), which implies a significant 96% upside to yesterday's close."
