Broker tips: AO World, JTC

(Sharecast News) - Shore Capital has cut its recommendation on AO World to 'hold', after a rally in the share price. The broker initiated coverage of the white goods retailer earlier in June with a 'buy' rating.

But in a note published on Thursday, it said: "AO is up more than 30% since our initiation two weeks ago, where we highlighted merit in the group's pivot to profitability and modelled a number of scenarios detailing how much cost could be stripped out.

"At 91p, we believe the shares now reflect perfect execution on our bull case, which would require a further 2 percentage points of sales staff cost removal above our base-case to a level in line with the 2019 full-year, despite 20% higher group revenue and 20% wage inflation over the past four years.

"Even on our upgraded base-case, the shares trade on a full 2024 full-year P/E of 23 times, hence we move our recommendation to 'buy' from 'hold'."

Shore added that rival Marks Electrical Group now offered a better 2025 full-year free cashflow yield of 6.7% compared to AO's 6.3%.

RBC Capital Markets upped its price target on JTC to 770p from 760p as it adjusted its forecasts for the acquisition of South Dakota Trust Company (SDTC) and placing.

"The deal continues JTC's M&A spree and looks to be good business in terms of its high growth, customer longevity and high margins," it said. "We continue to be fans of the company, although it is becoming a more diverse outsourcing business, whilst return on invested capital has been impacted by recent M&A."

RBC rates the shares at 'sector perform'.

JTC announced last week that it was buying SDTC, a US firm that provides administration services to the personal trust sector, for $270m in cash and shares.