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Broker Roundup Part 2 including Ferrexpo, Rambler Metals, Kincora Copper, Lonrho and Providence Resources
US broker JP Morgan Cazenove has downgraded BT Group (LON:BT.A) though it remains positive on the telecom giant’s long-term prospects.
JP Morgan believes that BT may struggle to grow revenues in the current year and as a result has downgraded its stance to ‘neutral’ from ‘overweight’.
However, the broker remains bullish on BT’s medium and long-term prospects, driven by the shift to high-speed broadband.
Its price target has been increased from 210p to 240p to reflect the recent pension agreement and it expects the dividend to increase “sustainably over time”.
Meanwhile, changes to technology and the way we watch TV will mean a “less favourable set of outcomes” for pay-TV giant BSkyB (LON:BSY) going forward, a leading broker suggested today.
Bank of America Merrill Lynch cut its stance to ‘underperform’ and its price target to 640p, even though it acknowledged the firm has a “fantastic track record”.
The shift in consumer demand from broadcast TV to on-demand brings new competitors which, in turn, will increase competition for subscribers, said the broker.
Turning to mining, analysts at Deutsche Bank have looked at Vedanta Resources (LON:VED), which they rate a buy, targeting a price of 1,900 pence.
Grant Sporre, analyst, said the firm posted a "solid" Q4 production result, though there were some mixed performances at the divisional level.
Aluminium was strong, recovering from a power disruption in the second quarter, with volumes 6 per cent above consensus, he said.
In the zinc India business, lead and silver volumes, along with mined zinc, beat expectations. Oil production was 2 per cent better than expectations, with the commissioning of the Bhagyam field in Rajasthan, ramping up quicker than expected.
Sporre added that production guidance for some of the divisions, had been trimmed back slightly. Mined zinc, lead and silver (11Moz) production from India, and integrated copper production out of Zambia (175kt) was slightly lower than Deutsche's expectations, he said.
Meanwhile, heavyweight firm JP Morgan Cazenove said in a note that iron ore pellet producer Ferrexpo (LON:FXPO) made a solid start to the year after improved first quarter pellet production.
It retains a 'neutral' stance on the stock.
Total pellet production in the first quarter of 2012 was 0.5 per cent higher than in the first quarter of 2011
However, JPM noted the 2012 first quarter production dipped 9.4 per cent from the final quarter of 2011. This was partly caused by adverse weather, which the broker said was to be expected in the first quarter.
Nomura retains its 'buy' stance on oil giant Royal Dutch Shell (LON:RDSB) and targets a price of 2700 pence.
It says its buy stance is based on operational and financial momentum in the second half and outlined a number of reasons why investors should build positions today including that in the year so far the company has underperformed European markets and the oil sector by
15 per cent and 8 per cent, respectively.
It also highlighted that there were increasingly fewer attractive stories or entry points elsewhere in "Big Oil".
"We think there is a potential strong bounce back in Q1 numbers (26 April) after a disappointing Q4. We forecast a net income increase of 35 per cent Q/Q."
City heavyweight Morgan Stanley has upgraded security specialists G4S (LON:GFS) to 'overweight' from 'equal-weight' and upped its target price to 325 pence from 280 pence.
Analyst David Hancock said that the company has had a strong period of contract wins, is improving the quality of its developed market portfolio and is materially enhancing its emerging market exposure with a Brazil platform.
Despite this, says Hancock, the stock has been one of the
weakest performers in Morgan Stanley's coverage in the year to date, creating a buying opportunity ahead of catalysts in May.
Those positive catalysts expected are the Q1 interim management statement on May 15 and Capital Markets Day on May 22, he said.
Turning to small caps, Rambler Metals & Mining's (LON:RMM, CVE:RAB) statement today drew positive comments from broker Ocean Equities.
Today, the company reported “encouraging” results from exploration drilling at its Ming gold-copper project in Canada and said mining and processing of gold ore had topped expectations.
Exploration drilling in the 1806 zone of Ming mine in Canada returned new visible gold intersections, which, according to Rambler, is a significant discovery for the Ming deposits as it indicated the potential for more undiscovered high grade gold zones.
“It has been known for some time that the earlier exploration efforts at Ming were production focused and did not get the full measure of the deposit,” said Ocean analyst Christopher Welch.
“Rambler now has a de-risked exploration programme ahead of it with a secure revenue source and so it can broaden the exploration effort.”
The analyst added that Rambler has a fully operational mine, which gives it the ability to quickly turn exploration success into mineable reserves and operating profit.
Elsewhere, Ocean Equities considers Mongolia as one of the last regions where a junior can add a lot of value quickly, and believes Kincora Copper (CVE:KCC) has what it takes to see a strong re-rating in the near future.
Analyst Christopher Welch has identified Kincora as one of only a handful of advanced and aggressive exploration companies active in the country with flagship assets located in relatively favourable locations for project development.
Kincora’s flagship asset is the Bronze Fox deposit in the country, which is in the same geological neighbourhood as the giant Oyu Tolgoi mine, just over 100 miles to the north-east.
Oyu Tolgoi is the world’s largest undeveloped copper deposit, which also contains an estimated 46 million ounces of gold. It was discovered by Canada’s Ivanhoe Mines (TSE:IVN) and is being developed in partnership with Rio Tinto (LON:RIO).
Africa-focused conglomerate Lonrho (LON:LONR) said its Oceanfresh Seafood division has entered into a new supply partnership with Costco Wholesale of the US.
The agreement will see Oceanfresh supply its sustainably sourced wild caught Hake loins for Costco's premium 'Kirkland Signature' bran
Broker Panmure Gordon said the deal replaced the supply of hake under the Oceanfresh brand but should increase the overall volumes of hake supplied to Costco.
"The deal indicates the ongoing progression of Oceanfresh’s capabilities and the increased confidence of retailers in these capabilities," it said in a note.
The broker reiterated its 'buy' recommendation and 21 pence price target.
Meanwhile, Providence Resources' (LON:PVR) multi-well drill programme provides clear share price catalysts, according to City firm Daniel Stewart.
The AIM quoted oil firm has successfully completed the first of six wells of the programme, which aims to open up commercial development projects in the waters around Ireland.
Indeed, Daniel Stewart analyst Kate Fisher says the Barryroe success last month shows the stock’s growth potential.
In a note about Solo, analyst Barney Gray, from Old Park Lane Capital, said that having recently increased its interest in the Lindi and Mtwara licences that comprise the Ruvuma PSA, Solo (25 per cent) and the operator, Aminex (75 per cent), are keen to accelerate exploration activities on Ruvuma.
"For this, we believe that Aminex and Solo will seek farm-in partners in order to expedite further seismic and drilling activity. Of particular interest to potential farm-in partners is the Lindi licence, which includes a 676 sq km offshore portion adjacent to Block 1, where the recent large Jodari-1 gas discovery is located."
He rates Solo a 'buy' with a target price of 1.5 pence.
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