Broker tips: Frasers, Kistos, Asos, B&M

(Sharecast News) - RBC Capital Markets upgraded Frasers Group from 'underperform' to 'sector perform' on Wednesday. The Canadian bank said Frasers, which owns Sports Direct and House of Fraser, should be relatively resilient in a consumer downturn given its exposure to low-priced sports retailing and due to the growth of its luxury format Flannels.

"Frasers has a mixed track record in Europe but longer term it has the opportunity to become one of a handful of strong omnichannel players, as the sector consolidates," it said.

RBC also cut its price target on the stock from 850.0p to 750.0p.

Analysts at Berenberg lowered their target price on energy company Kistos from 730.0p to 670.0p on Wednesday but said the stock was still "a cheap buy".

Berenberg updated its model on Kistos and incorporated a view of the tax proposals from the EU and the Dutch government, applying a "conservative base case" to its numbers, which assumes the Dutch government levies its proposed 65% sales royalty in the 2023-24 trading year and that the EU tax of 33% applies to the firm's 2022 profits, the net result brings it to its new price target - which still implies roughly 63% upside from the stock's current price.

"We view this as a floor to Kistos's valuation, with potential upside driven by: 1) the final outcome of the proposed Dutch levy, which may be below the current 65%; and 2) our gas price deck, which remains significantly below the forward curve," said the German bank, which stood by its 'buy' rating on the stock.

"The company remains cheap, in our view, and on our updated forecasts is trading on respective FY23/FY24 EV/EBITDA of 0.8x/0.4x and an FCF yield of (42%)/48%."

Liberum cut its recommendation on Asos to 'sell' on Wednesday after the group's full-year results disappointed.

The broker, which previously had a 'hold' recommendation on the AIM-listed fast fashion brand, also reduced its target price on the stock from 700.0p to 500.0p.

Liberum called full-year headline numbers from Asos "disappointing", and said the elevated stock write-offs and exceptional changes - on top of net debt of £153.0m - took it "by surprise".

Analyst Wayne Brown said: "We found the results presentation underwhelming - it left us with many questions unanswered, the strategy appeared under-baked and consequently, the management team sounded underprepared.

"We are also not overly convinced it takes just 12 months to get your customer base off the discounting drug, especially in the currently consumer environment.

Analysts at Deutsche Bank lowered their target price on retailer B&M from 480.0p to 395.0p on Wednesday but upgraded the stock to 'hold', stating the group was "always discount" but also "increasingly value".

Deutsche Bank said it had always taken "a cautious view" on B&M over the last 12 months, given the potential for "a reversal of sales uplift" seen during lockdowns as competitors reopened, category mix shifted away, the risk of "greater weakness" for the lower income demographic and the "threat of gross margin normalisation" on markdown and mix.

However, what Deutsche Bank said it didn't see was the group's previous chief executive officer selling more shares and then leaving, the weakness of GBP, and rampant inflation putting further pressure on sales and margins.

"Whilst B&M has been disciplined in its margin management over the years and it may benefit from some trading down," said DB,

"The valuation implies to us at 10.5x cal 2023 on our circa-15% below consensus numbers that we are largely at the low point but we retain our 'hold' recommendation given too much uncertainty."