Broker tips: B&M, Impax Asset Management

Analysts at Berenberg lowered their target price on asset manager Impax from 1,350.0p to 1,250.0p on Wednesday as ongoing market volatility had somewhat offset the firm's "strong H1 results".

Berenberg, which reiterated its 'buy' rating on the stock, said Impax's H1 was characterised by "a resilient level of organic growth". However, the German bank also noted that this was offset by falling markets.

"The company reported strong H1 results with earnings per share of 21.5p (+82% year-on-year), circa 5% ahead of Berenberg expectations. Impax demonstrated decent organic AUM growth of £468.0m in Q2 (to 31 March), representing a circa 5% annualised organic growth rate," said Berenberg.

"Total AUM fell by 8% to £38.0bn as a result of negative market movements driven by the conflict in Ukraine. Organic growth has slowed since Q1; this is understandable in light of the higher levels of uncertainty in the first part of the year. During April and May, markets have continued to fall and are down circa 5%."

Taking this into account, Berenberg cut its full-year 2022-24 estimates by roughly 5- 9% to reflect the interim earnings per share beat but also current market levels.

Analysts at Deutsche Bank upgraded their rating on retailer B&M from 'sell' to 'hold' on Wednesday, stating earnings risks were increasing but valuation upside was also present.

Deutsche Bank said B&M had joined an increasingly long list of retailers and given out guidance for the current trading year that did not seem to fit either the facts or the general investor worldview.

The German bank stated that now the problem was that it was waiting for B&M to cut its £550.0m-600.0m adjusted underlying earnings guidance on either weaker like-for-like sales from its current flat assumption or cost deleverage from its assumption of holding cost/sales flat – or more likely both.

"The decline in spending power of the core B&M customer remains a concern and we see an overhang from further consensus downgrades (DB FY23e adjusted EBITDA circ £500.0m) but the valuation downside no longer looks compelling, and we upgrade our recommendation to 'hold'," said DB, which also lowered its target price on the stock from 560.0p to 480.0p.

"There is likely to be some short-term volatility, but taking a 12-month view we think the absolute downside looks limited at circa 11x Cal 22e price-to-earnings."

Reporting by Iain Gilbert at Sharecast.com