Broker tips: William Hill, Bodycote, KAZ Minerals

22nd Aug 2016 10:40

(ShareCast News) - Barclays reinstated coverage of William Hill at 'overweight', raising the price target by 3% to 340p.It said the stock is cheap and there are potential catalysts in the second half such as announcements around cost savings in retail and online and hopefully news on a new chief executive officer."That said, we continue to prefer Paddy Power Betfair given its superior growth, strong balance sheet and strategic optionality," the bank said.Barclays noted that William Hill expects full-year earnings before interest, tax, depreciation and amortisation to be at the top end of guidance of £260m to £280m and said it now forecasts £275m versus a previous estimate of £265m.The bank said there is still a lot to do to turn around the online division and although it has been encouraged by the early progress under the new leadership of Crispin Nieboer, it is still early days.At the third-quarter results, Barclays is hoping for more detail on cost savings from the reorganisation of the retail division, news of cost efficiencies in the online division and news regarding a new CEO."We think all three issues may be a positive catalyst in H2, albeit we think some of the cost savings will be reinvested for growth." JPMorgan Cazenove upgraded Bodycote to 'neutral' from 'underweight' and lifted the price target to 605p from 565p, saying its UW thesis on the stock has largely played out.The bank said its UW rating was primarily based on end-market headwinds not being reflected in expectations, below-consensus earnings estimates, a rating that did not reflect a challenging outlook and risks to earnings, and inflated expectations on the likely progression of margins and therefore earnings.It was also worried the stock was a consensus long on both the buy and sell sides.JPM pointed out that the weaker financial performance has led the stock to underperform its UK capital goods stocks coverage by 13% in the past year.The share price performance and de-rating also point to an unwind of the consensus long positioning, on the buy-side at least, JPM said."Our estimates are no longer meaningfully below 2016 Bloomberg consensus EPS, end markets and the margins expectations better reflect the outlook, and the shares have reached a level we see capturing the ongoing risks in what remains a weak backdrop.""With the headwinds of inflated expectations and a premium rating removed, we reassess the investment case of the greater margin resilience and an improved cash flow (and resulting balance sheet optionality) and upgrade the stock." UBS upgraded KAZ Minerals to 'buy' from 'neutral' and lifted the price target to 270p from 150p saying it is now delivering on growth.In addition, it said it likes the group's strong growth profile, and execution risk at Bozshakol and Aktogay has decreased materially."A site visit in Q4-16 should also bolster market confidence on Aktogay, and execution should be smoother given the similarity to Bozshakol."With shares trading at 0.5x net present value, we think the risk reward is attractive, and we upgrade to buy."The bank said reduced execution risk and a stable copper price increase the probability that KAZ can raise the liquidity it needs to complete Aktogay, adding that significant progress is likely to be made by the end of the year."China Development Bank has provided 91% of KAZ's current debt facilities, at a rate of about 6%. Removing the remaining liquidity risk should be a positive catalyst."Last week, KAZ reported a rise in first-half earnings and said its new Bozshakol project is on track for commercial output in the second half.For the six months to the end of June, the copper miner said core profit rose to $115m from $88m in the same period last year. Pre-tax profit surged to $91m fro $2m last year.Although revenue fell to $302m from $341m, cost of sales declined to $170m from $282m and administrative expenses dropped to $51m from $71m.