Broker tips: Derwent London, Magnum Ice Cream Company

(Sharecast News) - Jefferies downgraded Derwent London to 'underperform' from 'hold' on Friday as it slashed its price target on the stock to 1,550p from 1,820p. The broker noted that Derwent London was selling £1bn over three years and had guided to earnings growth of 30% by FY30 to join Land Securities, British Land and Great Portland Estates in giving long-term guidance to compensate for "anaemic" returns.

"Share buybacks are a new option, but the drop, build, sell, repeat merchant developer model is, we think, broken," Jefferies said.

Jefferies said Derwent's new target price represented a 44% discount to FY26 net asset value of 3,282p and a forward dividend yield of 4.5%.

Analysts at Berenberg initiated coverage on The Magnum Ice Cream Company with a 'hold' rating and a 1,270p price target on Friday, implying a roughly 7% upside to the stock's current price.

Berenberg believes that The Magnum Ice Cream Company's "strong innovation pipeline", underpinned by higher reinvestment by the company, positions it to outperform category growth.

The German bank noted that the company was pivoting to faster-growing subsegments and increasingly targeting markets with stronger structural growth drivers.

"However, we are 'hold'-rated as we identify potential downside pressures on its category growth outlook, driven by risk to its volumes, which implies uncertainty for its medium-term growth prospects," said Berenberg.

That being said, the German bank noted that Magnum's newly-announced €500m productivity programme may support underlying earnings margin expansion over the medium term.

"We value TMICC using a DCF, resulting in a 2026E P/E ratio of 16.3x. Based on our valuation, it offers a c9% discount to comparable European food manufacturing companies such as Nestle (18.7x), Danone (18x) and Emmi (17.4x). We believe that this is justified given the business's seasonality risks, single-category exposure and limited track record as a new company," added Berenberg.