Broker tips: Mediclinic, Spire Healthcare, Asos, Boohoo, AB Foods, Pearson

(Sharecast News) - Analysts at Berenberg initiated coverage on Mediclinic and Spire Healthcare on Tuesday as they took a fresh look at the healthcare sector. Berenberg started Mediclinc off with a 'hold' rating and a 464.0p target price, stating the company's growth outlook and balance sheet had "significantly improved" since March 2020.

However, the analysts stated this looks to be already priced in, with the stock up by 38% year-to-date versus hospital peers - down by 15%.

"Mediclinic trades on 10.3x calendar-year 2023 EV/EBITDA, versus hospital peers on 7.7x. We are in line with consensus for FY23-24 EPS estimates," said Berenberg.

As far as Spire Healthcare was concerned, Berenberg started the stock of with a 'buy' rating and price target of 300.0p, stating it believes the group is "well placed" to benefit from a record NHS waiting list that should result in a surge in both NHS referrals and private demand.

"We think that Spire's targeted cost savings of £15.0m look more than achievable as the company rolls out efficiency programmes and Covid-19-related costs continue to ease," said the German bank.

"Valuation at 7.6x EV/EBITDA for FY23E (versus hospital peers on 7.7x) looks reasonable, in our view, equating to an earnings CAGR of 50% over the next three years. We are 11% ahead of consensus EPS for both 2022 and 2023."

JP Morgan has downgraded Asos and a clutch of other European retailers on Tuesday on the back of the mounting cost of living crisis.

JPM, which also reduced its rating on fellow fast-fashion firms Boohoo Group and Primark-owner Associated British Foods, said "cracks" in discretionary spending were now emerging, with around 15 European retail profit warnings in the last month alone.

The bank said: "While spend in some areas, including clothing, currently remains solid as the consumer makes up for lost time, we expect this to deteriorate rapidly in the second half, as the catch-up effect wanes and impacts on disposable income start to bite more acutely."

JP Morgan added that with earnings momentum "set to remain a greater driver of near-term sector performance than a potential longer-term valuation, we therefore remain cautious across our entire coverage with few expectations".

Deutsche Bank upgraded Pearson on Tuesday to 'buy' from 'hold' and hiked the price target to 900.0p from 625.0p as it said the educational publisher was "turning over a new leaf".

"After a period of decline driven by structural issues in the US courseware market, we think Pearson is now back on the path to sustainable growth as it recaptures the second-hand textbook market and innovates its offering," DB said.

"The journey has been -painful with several years of restructuring, but with the strategy tangibly progressing we turn more constructive."

The bank expects a 5% group revenue compound annual growth rate over 2021-25E and operating margins to expand from 11% to 15%.

It noted that despite the company's return to growth, the shares trade on 17x 2022E consensus price-to-earnings, at a discount to its two-year trading average and peers.

Pearson offers a dividend yield of around 3% and a buyback yield of around 4.5%, it said.