Broker tips: YouGov, Barratt Redrow, SSP

(Sharecast News) - Analysts at Berenberg lowered their target price on market research firm YouGov from 810.0p to 760.0p on Tuesday following the group's H125 trading update earlier in the morning.

Berenberg noted that "in challenging conditions", YouGov's H125 revenues had "grown modestly" on an underlying basis and noted that its data products division had returned to underlying growth.

The German bank noted that YouGov's outlook pointed to a continuation of modest year-on-year revenue growth in H2. However, in terms of forecasts, it has reduced its FY25 revenue forecast by 1.5% and adjusted underlying earnings forecasts by 4%.

"Shares are trading on an FY25E P/E of c11x and on a 50% discount relative to the two-year average 12-month forward P/E multiple. We reduce our price target to 760.0p (from 810.0p), which reflects the change in our forecasts," said Berenberg, which has a 'buy' rating on the stock.

JPMorgan Cazenove placed Barratt Redrow on 'positive catalyst watch' on Tuesday ahead of its capital markets day, as it took a look at UK housebuilders.

The bank said that after a tough start to the year, with a 10% drop due to macroeconomic concerns, the UK housebuilding sector has rebounded as those fears have somewhat dissipated.

It has also been underpinned by continued government rhetoric on getting 'Britain Building' with supply-side reforms and excitement on potential demand-side stimulus.

"Expanding on the latter point, we note that with affordability still a challenge, there is renewed hope that the Government will enact a form of demand-side stimulus with expectations fuelled by the launch of a HTB evaluation by the Government at the start of the year as well as newsflow that mortgage rules could be loosened by the FCA," it said.

JPM said any discussions are likely to be in very early stages but it's "heartened" that it now seems to be part of the political discussions.

"In conclusion, with potential demand side-stimulus a wildcard coupled with an abundance of supply-side actions being taken to unlock building, we expect the sector to trend higher," it said.

One of the bank's preferred picks was Barratt, which it placed on 'positive catalyst watch' ahead of its capital markets day on 12 February, where it expects the company to provide a more detailed trajectory of its mid-term objectives following the merger with Redrow. JPMorgan said it believes this is "what the market is waiting for".

RBC Capital Markets downgraded Upper Crust and Ritazza owner SSP to 'sector perform' from 'outperform' on Tuesday as it said there was more valuation upside elsewhere in the travel retail sector.

"We think SSP's strategy is heading in the right direction but investors will likely have to wait a little until it pays off meaningfully," RBC said. "We're encouraged by its action to improve its Continental Europe margin, but we do think it will be a multi-year journey.

RBC noted that the stock is trading at a premium to travel retail peers, hence the downgrade. It said there are two main factors weighing on SSP's free cash flow generation. The first is higher expansion capex given a very strong new unit pipeline and the costs associated with acquisitions made in recent years.

"We are encouraged by SSP's more cautious approach to M&A now, and we think the main priorities for this year will be integration and organic expansion," RBC said. "We expect expansionary capex to remain at the 2-3% of sales level for the medium term, as SSP focuses on growth."

The second is the fact that SSP has been deploying deferred maintenance capex from the Covid-19 pandemic.

"We estimate this was circa �60mn of capex in FY24 and will be c �30mn this year," RBC said. "However, we expect maintenance capex to return to the historical 4% of sales level next year. As such, we don't expect a meaningful recovery in FCF until FY26."