Broker tips: Centrica, MC Saatchi, Workspace

(Sharecast News) - Citi reiterated its 'buy' rating on British Gas owner Centrica on Monday after the shares fell sharply at the end of last week on news that Chancellor Rachel Reeves was considering cutting the link between electricity and gas prices. "We do not agree with the magnitude of the move given the short dated generation assets (old nuclear) at Centrica, bulk of which is expected to be closed towards end of the decade (we assume in our forecast all but Sizewell B is close by 2030)," the bank said.

"Even if we were to aggressively mark down all merchant nuclear to zero (ignoring a part may move onto RAB model), the impact on our sum-of-the-parts valuation is circa 3.5%."

Citi said the market's focus on earnings per share impact alone was incorrect and that it also needs to reflect duration in its approach.

"In a sector that's fully valued, we still see better risk/rewards at Centrica," the bank said. "We reiterate our 'buy' rating and see any weakness as an enhanced buying opportunity."

Analysts at Berenberg raised their target price on advertising agency M&C Saatchi from 150p to 170p on Monday, following the group's full-year results and "reassuring outlook".

Berenberg noted that M&C's FY25 results were in line with market expectations and also pointed out that the firm was confident in its ability to deliver FY26 numbers in line with consensus expectations, which it said was "reassuring" given the market's concerns about advertising spend due to the conflict in the Middle East.

The German bank highlighted that this confidence was driven by "expectations of continued strong growth in the highmargin Issues and Media specialisms", as well as greater cyclical resiliency of government work.

"With a renewed focus on shareholder value, the board is suggesting buying back shares in replace of the annual dividend, which makes sense to us given the shares trade on a P/E of 7.9x," said Berenberg, which reiterated its 'buy' rating on the stock.

Deutsche Bank downgraded Workspace to 'hold' from 'buy' on Monday and cut its price target on the stock to 400p from 480p as it said the firm's fourth-quarter update painted "another challenging picture" for the business.

Despite relatively resilient enquiry levels and conversion rates, like-for-like occupancy remained broadly flat at 82%, even with some further mild discounting, noted Deutsche Bank.

"However, it is clear the new management of Workspace do not intend to simply lever price to fill vacancy but rather reposition itself as the value option for occupiers (in a competitive field) and better monetise the platform," it said.

"But this will take (even more) time and impact profitability (and valuations) even further in the near term."