Broker tips: Lloyds, RBS, Randgold, Zoopla

5th Sep 2016 10:34

(ShareCast News) - Lloyds and Royal Bank of Scotland were under the cosh on Monday as Deutsche Bank downgraded the stocks to adjust for a "lower-for-longer" environment.DB pointed out that UK bank shares have been particularly volatile since the UK voted to leave the European Union, with RBS, Barclays and Lloyds all down 30-40% since pre-Brexit levels at one point."However, almost all are at their highest point today since the announcement, buoyed by better-than-expected economic data and statistics (house prices grew in August according to Nationwide)."Overall we think that the lower-for-longer environment is clearly negative for sector in the long term, but has differing impacts on individual banks in the near/medium term."Deutsche downgraded RBS to 'sell' from 'hold' and cut the price target to 170p from 200p. It said the bank was most at risk in the near/medium term due to already-low deposit rates (36bps), likely downgrades to loan growth, additional restructuring charges and the likely lack of a dividend until 2018.It cut Lloyds to 'hold' from 'buy' and trimmed the price target to 59p from 60p saying that while the bank should benefit in the near term from falling deposit costs and potential sub-debt redemptions, there are risks from re-mortgage churn in the medium to longer term.Deutsche upgraded challenger bank Aldermore to 'buy' from 'hold' and lifted the price target 188p from 170p. It said that of the banks it covers, Aldermore has the most to gain from the rate cut and term funding scheme crowd-out effect.It lifted its price-target on hold-rated Barclays to 176p from 170p saying it is now its most preferred name of the large-cap UK banks given its income diversification. However, it reckons the stock is trading at close to fair value."Upside will require better than expected core revenues and/or non-core execution." Randgold Resources shares rose on Monday as Numis upgraded its rating on the stock to 'buy' from 'hold' and left its target price at 9,000p.Numis said it expects Randgold's third quarter to show operational improvements and predicts a rise in production at the Tongon mine to 78,000 ounces from 50,000 ounces. It also expects production at the Kibali mine in the Democratic Republic of the Congo to stabilise with increased ore.Numis forecasts third quarter production of 315,000 ounces, along with an increase in earnings per share to 93 cents per share and a decrease in cash costs to $620 per ounce.Randgold reported a 4% drop in second quarter production to 281,000 ounces and a 12% gain in cash costs to $727 per ounce. Basic earnings per share dipped to 52 cents per share from 58 cents per share the same period a year earlier."Randgold faced a number of issues in the second quarter due to a combination of operational challenges at both Tongon and Kibali," Numis said."Management have, however, retained guidance for the year of 1.25Moz-1.3Moz and we expect the shares to re-rate driven by improved operational performance in H2 with higher gold prices supported by stronger Asian demand in the fourth quarter." Zoopla got a boost on Monday as Barclays upgraded the stock to 'overweight' from 'equalweight' and lifted the price target to 335p from 250p ahead of the investor day on 15 September.Near term, the bank said current trading for uSwitch was likely strong, leading to potential consensus upgrades.Beyond that, it sees several sources of upside and thinks management's vision - presented at the investor day - will refocus attention on them."We see an excellent standalone business in uSwitch, which the market is now more aware of (but doesn't yet fully appreciate in our view). And we understand the logic behind Property Software Group."But in our view, the market is not pricing in synergies between the businesses and doesn't fully appreciate the long-term vision the management team has for putting it all together. We see the investor day as an opportunity to increase understanding here, and a refresh for how people value the business."The bank said the obvious pushback is the outlook for the property portal business.In the event of a weaker UK property market, it sees a balancing act between the potential for Onthemarket to crumble, risks that agents could shift to Rightmove only, and the number of agents reducing."But our forecasts are conservative, and our analysis of the underlying Property Services multiple suggests caution is priced in."