Broker tips: Craneware, SSE, Good Energy

(Sharecast News) - Analysts at Berenberg raised their target price on software firm Craneware from 2,320.0p to 2,600.0p on Tuesday, stating the group was "a rare UK asset". Berenberg said Craneware was "an excellent inflationary play" given its "captive customer base" and the "crucial" role its software plays in ensuring revenue integrity and compliance for hospitals and pharmacies in the US, where it has a roughly 40% market share.

The German bank, which stood by its 'buy' rating on the stock, also noted that Craneware's full-year results beat consensus underlying earnings and earnings per share by roughly 3% and 5%, respectively.

"With annual recurring revenues growth for the year in the mid-teens, we expect at least low double-digit revenue growth for the group over the coming years," said Berenberg.

"Hence, the valuation of circa 22x next 12 months price-to-earnings ratio seems undemanding compared to its ten-year historical average of circa 31x."

JPMorgan Cazenove upgraded SSE on Tuesday to 'overweight' from 'neutral' and hiked its price target on the stock to 2,100.0p from 1,585.0p.

Within a challenging backdrop for the sector, the bank said it believes large integrated utilities with scale and experience such as SSE should be more highly valued than in the past.

"The company's portfolio of assets looks highly attractive," it said. "Renewables are the key to solving the energy trilemma, striking the balance of security of supply (away from imported gas), affordability and sustainability."

JPM stated it sees electricity networks as the backbone of the energy transition, with significant investment needed to meet government climate ambitions, including 50 gigawatts of offshore wind by 2030.

"Finally, flexible dispatchable generation assets can respond to market volatility, driving financial performance. In this context, we think today's share price discounts a harsh outcome on government intervention in wholesale electricity prices, and/or under appreciates SSE's networks growth profile," said JPM.

The bank also said it was placing SSE on "positive catalyst watch", given several upcoming events into year-end, which it reckons could drive a re-rating.

Analysts at Canaccord Genuity reiterated their 'buy' rating on renewable electricity company Good Energy on Tuesday, citing the group's "robust" first-half cash flow and "attractive" outlook.

Canaccord Genuity said Good Energy has reported "solid" first-half trading results, with interim revenues up 57% year-on-year at £108.0m, reflecting a secular move up in energy prices, and net cash balance of £16.0m at the end of June.

The Canadian bank noted that earnings in the first half were down due to the timing of impacts of price increases seen in the UK energy supply market but said it expects to see Good Energy deliver a "much stronger" second half.

"The group remains well-prepared for trading over the winter and is already 90% hedged with greater slack for PPA under-delivery than in winter 20/21," said the analysts, who stood by their 475.0p target price on the stock.

Canaccord also noted that cash flow had remained "robust" in July and August, "comfortably covering" the £3.7m the firm invested in Zap-Map.

"We continue to see our forecasts for Good's supply business as conservative and note the net cash (£16.0m) plus the last traded value of its Zap-Map stake (£14.0m) add up to around 180.0p per share in value, implying the rest of the business - which we currently expect to generate EBITDA of around £7.0m annually - is valued at just £13.0m."