Many of us welcome January with nicotine patches, detox smoothies and fitness DVDs. On the stock market however it is a month of big predictions.
Unlike many resolutions that are broken in matter of days, London’s top analysts are sticking their necks out by naming some of the stocks that they think will deliver all the way through the year.
Daniel Stewart and Co has named its ‘Top Picks for 2011’ in a note to clients.
The broker’s analyst team has picked out two favoured stocks in each of their core sectors: Metals & Mining; Oil & Gas; Healthcare; Telecoms & Technology; Leisure & Gaming; Financials.
Metals and mining analyst Martin Potts named two juniors Metminco (LON:MNC, ASX:MNC) and Peninsular Gold (LON:PGL) as his top picks for the year ahead. Richard Nolan believes that Gulf Keystone Petroleum (LON:GKP) and Chariot Oil & Gas (LON:CHAR) will be the best two stocks in the oil and gas sector.
Telecoms and technology analyst Mike Jeremy reckons Globo (LON:GBO) and Avanti Communications (LON:AVN) will lead the way in his sector. Meanwhile PartyGaming (LON:PRTY) and Playtech (LON:PTEC) are Michael Campbell’s top picks in the Leisure & Gaming sector.
Analyst Martin Potts is a big fan of the company’s Los Calatos copper-moly project in Peru. Setting a price target of 40 pence a share, he sees little or no downside from current levels (24 pence).
“The company also has an interesting portfolio of other assets in Chile ranging from advanced development projects to grass-roots exploration,” Potts adds. “It is well funded and at current levels investors have an excellent opportunity to become involved, with little downside risk.”
Peninsular Gold (LON:PGL). Target Price 99 pence (current price 45.5 pence)
Martin Potts singled out the Malaysia-based junior gold producer. He reckons an upcoming expansion of the Raub gold mine, in Pahang state, and ongoing exploration will drive a strong rally for the stock.
“Peninsular Gold is a straightforward business with one operating asset at the Raub mine and significant exploration ready to unfold,” Potts adds. “We expect the stock to appreciate with the commissioning of the plant expansion and receipt of drilling results from the current campaign.”
The mining expert emphasised that his price target is almost double Peninsular’s current share price.
Gulf Keystone Petroleum (LON:GKP) Price target 200 pence (current price 172 pence)
Analyst Richard Nolan says things are “coming together quite nicely” for GKP, which he rates a buy up to 200 pence a share (current price 172 pence).
The year promises to be one full of landmarks for the Kurdistan-based oil company with a major drill programme in store.
Crucial will be the data from Shaikan-2 towards the end of the second quarter, which should furnish the market with the crucial oil/water contact depth, and in turn provide a little more information on the true scale of GKP’s oil finds.
“Operations and volumes should trump financials in the short to medium term and be the dominant driver for Gulf Keystone’s share price,” Nolan adds. “We do not expect Gulf Keystone to return to the capital markets until late 2011 at the earliest barring a significant change in operations1. As such, we see an expanded and fully funded work program de-risking an investment in the company.”
Chariot Oil & Gas (LON:CHAR). Target Price 291 pence (current price 233 pence)
The AIM-listed oil company has been exploring over 30,000 square kilometres of prospective grounds offshore Namibia, with some success.
Earlier this month it identified a 3.1 billion barrel ‘mega-structure’ in its Southern licence, taking the overall prospective resources on the acreage to 13.2 billion barrels.
Richard Nolan believes that Chariot’s ‘mega-structure’ will tease potential farm-in partners into Chariot’s key projects, which would be a clear catalyst for the stock.
“Announcing a deal with an international partner should underpin the value of the whole company,” Nolan said.
Asterand (LON:ADT). Target price 30 pence (from 21 pence)
Analyst Vadim Alexandre raised his price target on the stock to 30 pence a share from 21 pence (current price 16 pence). He sees particular value being generated by last year’s acquisition of BioSeek.
“The collaboration model works well for BioSeek given the significant intellectual property portfolio the company has developed around the BioMAP system and database,” Alexandre says.
Deriving the new valuation, he says the group should be valued at a minimum of two times 2011 forecast sales. The hope is that Asterand is able to build on the progress made during 2010, when it landed a prestigious and valuable five-year contract with America’s National Cancer Institute.
The base award is valued at US$5.4 million over 17 months, with provisions for renewal at the NCI's option,” the analyst adds. “Not only is this contract expected to push Asterand back well into profitability, but it also further demonstrates the group’s success at expanding its work with government institutions.”
ReNeuron (LON:RENE). Target price 13 pence (current price 6.9 pence)
The stem cell pioneer gets a big thumbs up from Alexandre, who rates the stock a buy all the way up to 13 pence a share. Recently, ReNeuron’s ReN001 injection was used to treat the first stroke patient in a study group of 12 with no apparent side-effects.
The Daniel Stewart analyst said: “With its lead stem cell therapy now in the clinic, and with over £10m of cash on its balance sheet, the company is poised to continue delivering positive news flow in 2011.”
Avanti Communications (LON:AVN). Target Price £25.25 (current price 621 pence)
One look at Mike Jeremy’s target for Avanti quickly shows just how bullish the analyst is. He clearly thinks that the AIM-listed stock will be shot into orbit, just like the Hylas broadband satellites.
Avanti’s first broadband satellite, Hylas 1, was finally launched in November after a number of delays and it is scheduled to start beaming high-speed internet to remote areas in April 2011. The growing telecoms group plans to launch at least another two satellites in the coming years.
“We expect demand for satellite broadband to be driven by continuing uneven remote area provision, but also by mobile capacity (backhaul) needs and institutional (government) requirements,” Jeremy said.
Globo (LON:GBO). Target Price 103 pence (current price 16.5 pence)
Mike Jeremy’s other top pick is mobile-device software firm Globo.
The Greek software group has reinvented itself in recent years. After a complete change of direction developed the CitronGO! Software platform. It synchronises email, instant messaging, files and contacts across a number of different devices like PCs, Laptops and smart-phones.
“Globo’s CitronGO! mobile platform is now established with 13 Major Network Operator partnerships We estimate a 10 million potential user base by 2016, 5 percent of a 201 million subscriber base,” Jeremy said.
He adds: “We have revised our DCF-based valuation from 45 to 103 pence to reflect the huge potential contribution from CitronGO!”
PartyGaming (LON:PRTY) Target price 295 pence (current price 192 pence)
The online gaming group is valued at 295 pence a share, giving more than 50 percent upside from the current share price. Analyst Michael Campbell reckons may struggle in the poker arena, where the likes of Full Tilt and Poker Stars are piling on the competitive pressure.
However he reckons this will be more than offset by the performance of Party’s bingo and casino offering.
Campbell adds: “Party’s merger with BWIN results in the largest online gambling business across a number of product verticals. It’s the largest European Poker business across Europe and occupies top spot in casino, whilst sharing the spoils with Betfair in the sports betting vertical, though Betfair's model is distinctly different to the Party-BWIN model.”
PlayTech Target (LON:PTEC) Target price 541 pence (current price 395 pence)
Campbell calls the company the “best of breed” in the business to business market for online gaming. And he reckons the company will benefit from the dash to regulation in countries such as Italy, Scandinavia and the US.
Setting a 541 pence a share price target, the analyst adds: “We expect to see continued growth in online casino and bingo when Italy and France come online. This is further underpinned by opportunities in the Scandinavian and US markets. Regulation, M&A, new licensees and a move to the main list are all catalysts for the share price.”
Planet Payment (LON:PPT,OTC:PLPM). Target Price 120 pence (current price 94.5 pence)
Simon Willis reckons Planet Payment is set up well for 2011, after a string of deals with US payment processor Global Payments (NYSE:GPN) and the lifting of the Visa moratorium on new business in October
“These two factors, together with a strong flow of new merchant acquisitions in Q4, set the group up well for 2011,” Willis said.
“In addition, a flow of corporate activity in the sector last year, which saw Visa and MasterCard, as well as several private equity houses, acquire similar businesses suggests the 2011 EV/EBITDA (10x) looks cheap.”
Planet Payment’s multi-currency processing service helps retailers and other merchants perform transactions with international cardholders in the cardholder’s home currency.
NEOVIA (LON:NEO). Target Price 80 pence (current price 64 pence)
NEOVIA is what is known as an alternative payments business, essentially it operates a number of services which facilitate secure online payment processing. It operates the NETELLER online payment business and it recently acquired US firm Optimal Payments.
Simon Willis reckons the acquisition is a big plus for the AIM-listed stock.
“The acquisition of Optimal Payments by NEOVIA is a transformational deal which achieves four of the group's five strategic objectives,” Willis said.