Broker tips: Iofina, Beazley

(Sharecast News) - Analysts at Canaccord Genuity initiated coverage on specialty chemicals group Iofina at 'buy' on Monday as it pointed to a "strong return profile ahead". Canaccord said Iofina's vertical integration gave it a "significant cost advantage" over competing iodine suppliers, which were primarily in Chile. It also said Iodine has "attractive long-term growth characteristics" and was currently experiencing "significant supply tightness".

"We expect this to continue well into 2023, and potentially beyond, allowing Iofina to benefit from premium returns," said Canaccord.

The Canadian bank believes Iofina's "successful transition" to being not only free cash positive, but also its "exceptionally robust balance sheet", was underrated in the market.

Canaccord Genuity started the stock off with a 35.0p target, based primarily on multiples, meaning the stock would trade at 13x/15x 2023E/24E price-to-earnings ratio at its target price.

"We believe earnings for FY22E are likely to be in the range of EBITDA $8.5-9.5m; we expect FY23E to be somewhat stronger due to the mix of lagged contract pricing, improved cost recovery, and some volume increase from the 1H23 start-up of IO#9. The group is not wasting current profits and is investing in chemical as well as further IOsorb plants. It has been free cash generative throughout the past five years and we expect will be able to continue this record over the next three years," said the analysts.

Analysts at Berenberg slightly raised their target price on insurance firm Beazley from 720.0p to 750.0p on Monday, stating profitable growth looked set to accelerate.

Berenberg updated its forecasts on the stock to reflect Beazley's £350.0m capital raise on 16 November and added that the firm's rationale for growing its property franchise made "perfect sense" and that the timing was "fortuitous" given "very strong" momentum in its cyber business.

"In our view, this capital allocation decision is a bold statement about Beazley's confidence in the outlook for its cyber business," said Berenberg. "We think 2023E will involve a step-up in Beazley's scale: we estimate the company will be 2.7x the size it was in 2017 in terms of net premiums."

The German bank now forecasts net premium growth to accelerate "significantly" to 28.5% in 2023, up from 15% before.

"We estimate a circa 24% compound annual growth in net asset value per share between H122 and FY24E which, in our view, will be very difficult for other companies in the sector to match," said Berenberg, which also reiterated its 'buy' rating on the stock. "This makes Beazley one of the most attractive profitable growth stories in insurance."