Broker tips: IntegraFin, Hunting, Wise

(Sharecast News) - Analysts at RBC Capital Markets slashed their target price on financial services company IntegraFin from 515.0p to 380.0p on Thursday ahead of the group's third-quarter trading update. RBC Capital said it had updated its estimates for IntegraFin to reflect recent market movements and cost guidance delivered at the time of the firm's interim results.

The Canadian bank stated the key moving parts to its earnings per share adjustments were higher cost growth and market-to-market impacts on revenues.

RBC said the strengthening of cost growth assumptions reflected company guidance around further increasing headcount, as well as the bank's expectation that IntegraFin will raise employee salaries in light of the current inflationary economic backdrop.

"As a result, we now look for YoY underlying expense growth of 21% in FY22E, 10% in FY23E, and 6% in FY24E Negative market moves in the quarter mean we now forecast Q3 FUD of £52.2bn, a 2.5% fall QoQ. Within this movement, we expect a robust net flow result of +£1.1bn in the quarter. Nevertheless, the lower FUD weighs on our fee revenue forecasts for all years," said the analysts.

The net impact of all RBC's changes was reductions to its EPS estimates of 11%, 19%, and 14% for 2022, 2023, and 2024, and a reduction in dividend per share estimates by 6%, 15%, and 14%, respectively.

"We remain favourably disposed to IHP's market positioning and long-term growth prospects. The group can offer a premium service at an average price point, which makes for a compelling proposition. At current levels, we see a case for deep underlying value in the shares, but given stunted short-term earnings growth we can envisage a better entry point on a 12m view and retain our 'sector perform' rating," concluded RBC.

Analysts at Berenberg upgraded energy services supplier Hunting from 'hold' to 'buy' on Thursday, stating recent weakness had provided an "attractive entry opportunity".

Berenberg noted that Hunting's share price has now fallen by 30% since its trading statement on 30 June due to a weaker outlook for underlying earnings margins for the 2022 trading year.

However, Berenberg said revenue and activity levels had continued to recover, driven by the Hunting Titan and the North American segments as the rig count moves higher, and added that the group's outlook was also strengthening, with its order book standing at $313.0m at the end of May - up over 45% since the 2021 year-end.

The German bank also noted that margins were recovering from trough levels, albeit at a slower pace than consensus expected.

"There is significant operational leverage in the business, and as the rig count continues to grow, we anticipate attractive margin expansion in 2023/24 as revenue heads back above $800.0m," said the analysts, who also raised their target price on the stock from 220.0p to 275.0p.

"On this basis, we believe the recent sharp pullback in the shares provide an attractive entry opportunity, and we upgrade the stock to 'buy'".

Credit Suisse slashed its price target on payments firm Wise on Thursday as it argued that management will likely be strategic rather than driven by near-term share price performance.

The bank, which rates the shares at 'neutral', said it was factoring the miss on EBITDA margins in the full-year results last month. This is driven by CS' view that a long-term management team will continue to re-invest in the business and the cost of growth is likely increasing meaning operating leverage is unlikely to be visible in the near to medium term.

In addition, it said the price target cut to 410.0p from 640.0p also reflects higher market discount rates. The reduction is split roughly equally between a lower EBITDA margin and higher discount rates, it said.

"Significant catalysts in the equity story have not yet presented, where we see some important elements as binary in nature reflected in the large range between our blue sky and grey sky scenarios.

"Hence we retain our neutral rating. To turn more constructive over share-price performance in the next 12 months, we want to see signs Wise Platform can change risk perceptions around terminal value, evidence of operating leverage emerging and stabilisation in market discount rates."