Broker tips: JTC, Curry's, Next

(Sharecast News) - Analysts at Jefferies initiated coverage on fund manager JTC with a 'buy' rating and an 860.0p target price on Tuesday, citing exposure to a growth industry and a "positive outlook". Jefferies stated JTC operates in a growing market, has a record of good M&A execution, and high cash conversion, with the "underpenetrated" US market, the world's biggest, also presenting "an important opportunity".

"Our estimates are for mid-single-digit AUM growth to the end of the decade globally, with a continued shift to alternatives. This would expand JTC's opportunities, on top of further market penetration (especially in the USA). We forecast 15% revenue growth yearly to 2025 as a result (vs c. 20% historically)," said Jefferies.

The broker highlighted that with long-term income streams, a 15% top-line compound annual growth rate to 2025e, stable margins, and a 30% dividend pay-out, it reckons JTC offers "attractive exposure" to the rising internationalisation and regulation of finance.

"Our DCF gives an £8.60 valuation on a 9% cost of equity. We reduce profit growth from our circa 10% explicit forecast over five years to a 2% terminal rate. That equates to a 1.2% full-year 2023 yield and a price-to-earnings two years forward broadly in line with the long-term average of 21.0x," Jefferies added.

Numis upgraded Currys to 'reduce' from 'sell' and cut Next to 'hold' from 'buy' as it took a look at the UK retail sector, saying it has gone from "less bad" to "quite good" and changing its price targets on a raft of names.

Numis noted that the sector has rallied more than 40% from recent lows, outperforming the market by over 20% but said "this looks justified".

"Fears were unfounded and the backdrop has improved," it said. "In updating our household cashflow, we note a better outturn to '22 and outlook for '23. The wallet for discretionary spending in 2023 looks to be circa 5% higher than looked likely, on an encouraging trajectory through the year."

The broker added that whilst earnings expectations were yet to reflect this, it stated sector valuation has recovered, with "most boats" rising so far. However, it cautioned that this also meant that from here on in, this demands "a more selective approach" to sector exposure.

Numis lifted its price target on Currys to 65.0p from 45.0p, while it lifted its price target for Next to 7,000.0p from 6,700.0p