Broker tips: Just Group, Asos, Marshalls

(Sharecast News) - JPMorgan Cazenove lifted its price target on Just Group on Wednesday to 125p from 115p to reflect higher new business sales forecasts, and a valuation roll-forward. It argued that the market is overlooking the company, which in its view is "the most focused way to play the strong growth potential of the UK pension risk transfer (PRT) market".

"In spite of its low market cap, Just is clearly punching above its weight and with market share of circa 10% in 2022 is now one of the major insurers in this market, with balance sheet strength and Solvency II capital that is comparable with peers," JPM said.

"While we understand investor concerns about its mono-line business model and asset risks, we think these are more than priced in at circa 3x 2024E IFRS4 P/E and circa 0.4x 2023E unrestricted tier 1 capital (SII equity)."

The bank forecasts more than 20% compound annual growth rate new business sales growth to 2025E and similarly strong growth in underlying profit. JPM has an 'overweight' rating on Just Group.

Elsewhere, Liberum slashed its price target on Asos to 500p from 700p after the online fashion retailer's interim results.

The broker, which has a 'sell' rating on the stock, said the results were "well below" current market expectations, with revenue declining 10% on CCY basis, and an adjusted pre-tax loss of £87.4m versus consensus of £63m.

It noted that sales trends worsened in January to February and that this has continued into March/April.

"While plans to deliver £300m of Driving Change agenda benefits in FY23E remain on track, guidance for FY23E has been cut to a circa £29m to £9m adjusted EBIT loss (consensus £38m profit) and free cash outflow of circa £100m (bottom end of prior range of -£0 to -£100m)," it said.

Liberum said gross margin is at risk of lost sales from the new strategy and therefore risk remains of a further inventory write-off given current trading trends.

"With free cash flow expectations reduced, we still see risk that in a plausible downside scenario, the group may need to raise further cash," it added.

Finally, Berenberg cut its price target on Marshalls to 330p from 350p after the company's trading update a day earlier.

Marshalls shares tanked on Tuesday after the landscaping and building materials group cut annual guidance on the back of a 14% fall in like-for-like sales, due to lower new house building and continued weakness in private housing maintenance activity.

Berenberg said: "The update highlighted the continuation of tough trading conditions in the UK new build and private repairs, maintenance and improvements (RMI) markets, ultimately resulting in the company guiding below prevailing market expectations.

"As such, we update our numbers to reflect the further deterioration, resulting in a decline in 2023/2024/2025 earnings per share of -14%/-12%/- 10% respectively."

Berenberg said it thinks Marshalls has some high-quality assets in the business, but is dependent on a recovery in UK construction market volumes that, at present, is just not there.

"As we have flagged in recent notes, the macro environment is undoubtedly tough in the near term and we wait to see how demand levels evolve in the coming months," it said.

Berenberg rates the shares at 'hold'.