Broker tips: LendInvest, British Land, 888 Holdings

(Sharecast News) - Analysts at Berenberg lowered their target price on mortgage lender LendInvest from 275.0p to 230.0p on Tuesday, stating the group's outlook was "cloudy" despite a "strong" end to its 2022 trading year. Berenberg noted that LendInvest's first full-year results since its listing in July 2021 were 7% ahead of expectations at the underlying earnings level at £20.3m, supporting its investment case and the analysts' 'buy' recommendation.

The German bank stated LendInvest's assets under management growth had been helped by "a buoyant property market" where prices rose by roughly 11% year-on-year to June, according to Nationwide.

However, Berenberg also noted that the outlook for continued house price growth was clouded by "necessary interest rate rises", given high levels of inflation in the UK.

"Higher interest rates lead to higher swap rates, with both two- and three-year SONIA rates increasing circa 2%+ versus July 2021. Taking both higher costs and lower margins into account, we have cut our estimates for both FY23E and FY24E by circa 20%," said Berenberg.

"Over the longer term, we continue to believe that LendInvest can grow strongly and we still forecast circa 40% EPS growth for FY23E. Considering that LendInvest operates in a large market, we believe that the company is well suited to deliver outsized returns for investors."

British Land was under the cosh on Tuesday after RBC Capital Markets downgraded its stance on the shares, as it took a look at the London office and UK retail property markets.

The Canadian bank cut British Land to 'underperform' from 'sector perform' and slashed its price target on the stock to 375.0p from 475.0p.

"Our more cautious view of London office and UK retail property markets negatively impacts our forecasts for British Land," it said. "Furthermore, we believe a more negative macro scenario appears slightly at odds with management's view of their markets, increasing the potential negative impact to British Land's returns.

RBC added that it believes in "more demanding tenants" leading to wide-ranging trends within certain property markets, but in its view this is unlikely to be supportive of attractive development returns near-term and will only benefit a proportion of most REITs' existing portfolios.

Analysts at Canaccord Genuity slashed their target price on bookmaker 888 Holdings from 690.0p to 470.0p on Tuesday following the group's acquisition of William Hill.

Canaccord Genuity stated that with 888's acquisition of William Hill now completed, it had updated its forecasts to formally reflect the enlarged group and the move to reporting in GBP.

"We reduce our SOTP-derived target price to 470p (from 690p) reflecting updated GBP forecasts and slightly moderated component multiples (10x online vs 12x previously) given the compression in sector multiples over the past 9 months, but significant upside remains," said Canaccord.

"Whilst market conditions have changed materially since the initial deal announcement back in September and financing costs have also increased, we believe the strategic rationale for the combination remains compelling and positions the enlarged group strongly both from a scale perspective and a product and geographic mix perspective."

The Canadian bank, which reiterated its 'buy' rating on the stock, said 888's "expanded and strengthened management team" can now begin the work to integrate the two businesses and deliver the planned £100.0m of synergies previously outlined.

However, Canaccord also noted that the industry continues to await the UK Gambling Act White Paper, which it said remains "a key risk factor" in the near term. It also cautioned that recent events in Westminster may delay publication further.

But the analysts also said if press reports from recent weeks were to be believed there should not be any surprises in the review that both 888 and William Hill had not already "extensively prepared for".