Broker tips: William Hill, Kazhakmys, IAG

28th Feb 2014 12:23

Daniel Stewart has maintained its "buy" stance on shares in gambling company William Hill despite a fall in annual pre-tax profit of six per cent to £257m.The broker trimmed its target price to 500p from 555p on the back of an 8% cut in forecasts in 2014 earnings before interest, tax, depreciation and amortisation to £359m and earnings per share by 10% to 29.5p."However we do not find a multiple of 9.3 times 2014 EBITDA particularly demanding for a brand and business with the scale of WMH and we remain buyers of the stock," the broker told clients, adding that the balance sheet is in "good shape at 2x net debt/EBITDA to aid further expansion and revenue from outside of the UK is growing".Copper miner Kazakhmys' restructure announced on February 27th was "significantly bigger in scope" than broker Credit Suisse expected and as a result the broker has updated its estimates for future earnings on the back of a "credible" path forward for the company.It revised its price target to 330p from 235p, but maintained its "neutral" stance on the stock given a recent uplift in the share price. Credit Suisse forecasts 2014 revenues of $2.7bn compared with 2013's actual $3bn, falling to $1bn in 2015 and rising to $1.8bn in 2016.Earnings before interest, tax, depreciation and amortisation are forecast to fall to $274.9m this year, $217m in 2015 before an expected increase in production kicks in to a profits of $592m in 2016."After an extended period of under-performance, Kazakhmys has set out a credible restructuring plan that is significantly bigger in scope than we and the market expected," the broker told clients."Once completed the company will be transformed from a high- to low-cost producer and a significantly smaller workforce ( to 12,000 from 56,000)."We forecast a drop in (copper) production from 290 kilotonne in 2014 to 85kt in the first half of 2015 (in line with company guidance) before ramping up to around 350kt by 2018. We assume that Kazakhmys injects $300m of cash into the new private entity to support the business."Liberum Capital said Iberia and British Airways owner International Consolidated Airlines Group (IAG) is on course to hit "stretching" targets.IAG on Friday said the acquisition of Spanish budget carrier Vueling, an overhaul of Iberia and improved revenue at BA had led to an annual operating profit of €770m against losses of €23m a year ago.Chief Executive Willie Walsh said: "In 2014, we expect to make steady progress towards our 2015 Group operating profit target of €1.8bn, with relatively flat unit revenue growth, and margin expansion driven by falling unit costs."Liberum has a 'buy' recommendation on IAG with a 450p target price.It said a 134% increase in operating profit in two years against a depressed but materially profitable base was "a stretching target at first glance."However, it added it believed it was achievable "even without a tailwind from better economic conditions."Keith Bowman at broker Hargreaves Lansdown said the results had sparked some profit-taking.He said IAG was dependent on an improving global economy, fuel costs could rise and rival Ryanair, which is undergoing changes to make it more customer-friendly, could give Vueling a run for its money.Bowman said: "For now, IAG is progressing. The removal of costs remains central, with labour productivity and aircraft fuel efficiency still topping the agenda. For now, and despite a testing of investor faith thanks to the stellar share price performance, [third party] analyst opinion continues to denote a strong buy."AB