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Shell's a standout opportunity in ‘horrible and trapped’ sector

Shell, BG, and Astrazeneca are among the blue-chips under Thursday's broker spotlight

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Shell is upgraded to 'buy', but BG could be a cheaper entry for investors

Royal Dutch Shell (LON:RDSB) is a standout opportunity in an otherwise ‘horrible and trapped’ European integrated oil sector, according to Deutsche Bank analyst Lucas Herrmann.

The sector is supported by yield, but growth is contained by uncertainty around commodity and cash flow, said the analyst.

He now expects a period of a lack of direction but which will likely undergo a series of short-duration cycles driven by sentiment toward the commodity and data-points on earnings and cash flow.

Herrmann formally upgraded Shell to a ‘buy’ today, and set a 2425p price target (some 30% above the current price of 1822p).

BG Group (LON:BG.), by virtue of the proposed US$70bn merger, is however the best way for investors to acquire exposure, the German bank reckons.

“On a 12m view Shell looks the stand-out opportunity, albeit a discount to bid terms means BG is our preferred entry route,” Herrmann said.

Deutsche rates BG as a 'buy’ with a 1460p target, which suggests around 37% upside to the current price of 1064p.

Elsewhere in the sector, Swiss broker UBS says the ‘hard times’ for liquefied natural gas (LNG) have already been discounted in the market, and Africa focused Ophir Energy (LON:OPHR) is deserving of an upgrade to ‘buy’ from ‘hold’.

“Ophir is down 50% over the past year but now looks oversold,” analyst Daniel Ekstein said in a note.

Elsewhere, drug maker Astrazeneca (LON:AZN) is upgraded by Berenberg to ‘buy’ from ‘hold’, with the price target lifted to 5,200p from 4,800p, on the strength of a robust oncology pipeline which Berenberg analyst Alastair Campbell believes will drive future growth.

"Astra’s pipeline should return the company to growth beyond 2017. Much of the excitement has focused on immuno-oncology (IO) and was enhanced by Pfizer’s aborted 2014 bid. However, recent setbacks (eg: brodalumab) have dampened enthusiasm of late," he noted.

Meanwhile, Numis Securities has taken a swipe at investment management groups Ashmore (LON:ASHM), Brooks Macdonald (LON:BRK) and Polar Capital (LON:POLR); all of which were downgraded today.

Ashmore and Brooks Macdonald are now rated ‘hold’, while the recommendation for Polar moves to ‘reduce’ from ‘hold’.

West End property investor Shaftesbury (LON:SHB) has been downgraded by Goldman to ‘neutral’ from ‘buy’.

Goldman also adjusted its view of several other British property firms; notably Land Securities (LON:LAND), British Land (LON:BLND), and Intu Properties (LON:INTU) saw price targets nudged higher, whilst Great Portland (LON:GPOR) was upgraded to ‘buy’ from ‘neutral’.

In the small caps, wealth management new-comer European Wealth (LON:EWG) has a 'buy' rating repeated by Panmure Gordon after it announced the acquisition of ISM, a UK based IFA, as part of its consolidation strategy.

It notes the EWG shares trade on around 12 times FY16 earnings post this deal.  The broker has a 140p price target  on the stock - representing a hefty increase from the current price of 88.5p.

Nanobiotix (EPA:NANO) , the developer of nano-medical technology, has been given clearance to start a new clinical trial for its lead NanoXray product, NBTXR3, it emerged today.

Clinical trial authorisation has been given by regulatory body, the French National Agency for Medicines and Health Products (ANSM), to start a Phase I/II trial in two new cancer patient populations with high global incidence of more than 1.5mln patients per year: hepatocellular cancer (HCC) and liver metastases.

Broker Stifel noted: "The company had previously anticipated the start of the liver cancer trials before the end of the year, so news of the authorisation indicates that the company is well on track with this part of its clinical programme.

"Our forecasts remain unchanged; we retain our Buy recommendation and target price of €30.10 per share."

Quick facts: Royal Dutch Shell PLC

Price: 1327.6 GBX

LSE:RDSB
Market: LSE
Market Cap: £103.65 billion
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