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Broker spotlight – ITV, Kentz, Ocado, Severn Trent, Imagination Technology, Rose Petroleum

Broker spotlight – ITV, Kentz, Ocado, Severn Trent, Imagination Technology, Rose Petroleum

ITV (LON:ITV) is the “king of content” according to JP Morgan Cazenove, which sees it as the best in class free-to-air broadcaster.

Analyst Filippo Pietro Lo Franco says ITV’s fast growing content division, which has the rights to programmes such as Downton Abbey, is being undervalued by investors.

With price-to-earnings of 13.6x based on 2014 estimates, the analyst reckons ITV is too cheap.

JPM Cazenove today repeats an ‘overweight’ rating for ITV, with a 232p price target.

Jefferies upgraded its price target for grocery delivery company Ocado (LON:OCDO) to 330p to reflect the strong ramp-up in margins and international potential. 

There are risks from changes in the Waitrose relationship and challenges from alternative food online models, which makes the shares look fully priced.

Goldman Sachs has downgraded UK water companies United Utilities (LON:UU.) and Severn Trent (LON:SVT) to ‘neutral’ from ‘buy’. 

Shanks though gets an upgrade to buy as Goldman regards it as  a takeover target due to its low rating, relatively small size and ongoing M&A activity in the sector Europe-wide. 

The sale of Kentz (LON:KENZ) to Canada’s SNC-Lavalin makes strategic sense, says VSA Capital analyst Marc Anis-Hanna, who described the London listed oil services firm as “very appealing”.

Yesterday, SNC offered 935p share to buy the company – the takeover was pitched at a 33% premium to the previous close.

“We believe this transaction makes strategic sense, as it creates geographical synergies between the two companies, with SNC having a strong presence in North America and KENZ an important footprint in the Middle East and Asia Pacific,” Anis-Hanna said.

Investec reckons Imagination Technology (LON:IMG) is turning a corner at last, but the broker is not yet bullish enough to raise its ‘hold’ rating or 250p price target, because of a concern over the firm’s core royalties.

Nevertheless, analyst Roger Phillips said: “Full year 2014 results are positive overall due to a beat on licences, suggesting an excellent H2, and a 9% beat on adjusted EBIT suggesting opex cost control. 

“After three major downgrades in the last 15 months, Imagination looks to have turned the corner on forecast expectations at last, and with short interest still heavy, further squeezes in the share price looks likely.”

Allenby Capital’s attention was on small cap shale explorer Rose Petroleum (LON:ROSE), which according to the broker may rapidly make a transition from junior to mid-tier E&P status – by unlocking two new shale plays.

Analyst Peter Dupont believes Utah shale acreage, acquired at just US$110 per acre, could plausibly be worth around US$2,000 an acre following initial de-risking activities – that would give the projects a US$344mln (£208mln) price tag.

Not getting too carried away too soon, the broker says Rose is currently worth 4.3p per share - which in itself is almost double today’s price. 


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