Broker tips: EnQuest, Capricorn Energy, OSB, IWG

(Sharecast News) - Jefferies upgraded EnQuest and Capricorn Energy on Monday on valuation versus risks grounds. The bank lifted both stocks to 'buy' from 'hold'.

"EnQuest and Capricorn have been two of the worst-performing E&P stocks in our coverage this year, but with sector-leading free cash flow yield (EnQuest) and/or net cash balance sheet (Capricorn) we see little balance sheet risk to either name and their price targets are little changed given largely oil-weighted exposure," it said.

"We could also argue a potential regional M&A consolidation angle for either name given ENQ's material UK tax losses and CNE's ex-Shell Egypt production assets & balance sheet," Jefferies said.

"Thus, we upgrade both EnQuest and Capricorn to Buy on valuation versus risk grounds."

Jefferies kept its price target for EnQuest at 20p, and cut the PT for Capricorn to 225p from 230p.

RBC Capital Markets cut its price target on IWG to 155p from 190p, keeping the rating at 'sector perform' as it sees better value in other cyclicals.

"Whilst IWG's recent update pointed to FY trading in line with expectations, we have reduced our 24E EBITDA forecasts by 10%," RBC said.

"This reflects forex, caution on the overall macro and impact on supply/usage of office space, along with uncertainty around WeWork's future (and ongoing pricing strategy).

"In our view, whilst a SOP buy case could be constructed, we have limited granularity on Worka and there are just too many uncertainties at this point."

Analysts at Shore Capital stood by their 'buy' recommendation for shares of OSB Group despite the lender's unscheduled 6 July update.

That update saw them cut their estimate for OSB's full-year 2023 net interest income to £170m, for a 30% reduction in their estimate for the group's earnings per share to 70.2p.

The ordinary dividend payout was therefore now seen coming in 13% lower at 35.0p.

In particular, they noted that the reduction was the result of a "technical accounting adjustment" that would impact revenue recognition.

It would not, however, flow out to outer-year forecasts, they added.

So while their 2024-25 net interest margin forecasts were lowered from 3% to 2.85% and those for EPS and DPS by -5%, they judged OSB's fundamentals to be intact and said the ensuing share price drop had been an overreaction.