Broker tips: M&G, Jubilee Metals

(Sharecast News) – Analysts at Deutsche Bank slightly lowered their target price on investment manager M&G from 230.0p to 225.0p on Friday, stating it was “waiting for the kettle to boil”.

Deutsche Bank stated market movements during 2021 were likely to have contributed 14 points to M&G’s solvency ratio and could add an additional £530.0m of net cash remittances in 2022.

Unsurprisingly, DB noted that hopes were increasing that management will announce a plan to deploy the build-up in excess cash, including a capital return to shareholders, at its full-year results.

“In this respect, we note that the 8% rise in the shares year-to-date implicitly captures circa £400.0m of capital return already, and we ourselves now build in a share buy-back of that amount – though at interim 2022,” said the German bank.

“However, whilst this could indeed be positive, we remain concerned about the growth of the underlying fund management business and the group’s high leverage.”

Deutsche Bank retained its ‘hold’ recommendation on the stock, noting it sees “better value elsewhere in the sector”, particularly at Aviva.

Analysts at Berenberg initiated coverage on copper ores company Jubilee Metals Group on Friday with a ‘buy’ rating and a 21.0p target price, stating the stock was “mining the circular economy”.

Berenberg said Jubilee, which recovers chrome, platinum group metals and copper from mine tailings, was “one of the few ways” to gain mining exposure with a clear alignment to the circular economy and UN sustainable development goals.

The German bank said the company was more of a technology/processing business rather than a miner, and noted it operates in “a fledgling market with huge opportunity”, not only due to depleting mine reserves and grades but also due to “a large amount of spent tailings” available for processing from historical mining operations.

“We estimate that the copper tailings market alone is worth $710.0bn globally; this is a clear opportunity across the base metals space, particularly given the push for ‘future-facing commodities’ and the scope for supply/demand imbalances in key commodities such as copper, as well as the ability to turn balance sheet liabilities into assets and safely rehabilitating old facilities that could have been an environmental risk,” said the analysts.

Berenberg added that the opportunity for Jubilee did not stop there and estimates that the global platinum group metals space to have 42.0m ounces of recoverable PGMs, at a market value of $106.0bn.

“We value Jubilee on a blend of 1x NAV and 6.5x EBITDA, a discount to its trailing four-year average. The stock is trading on 0.92x NAV.”

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