Saturday 24 March 2018

Iseq names could see share surges in 2017 if planets align, Davy Stockbrokers predicts

Traders work on the floor at the opening of the day's trading at the New York Stock Exchange (NYSE) in Manhattan. Photo: Reuters
Traders work on the floor at the opening of the day's trading at the New York Stock Exchange (NYSE) in Manhattan. Photo: Reuters
John Mulligan

John Mulligan

Shares in a number of listed Irish companies have the potential for significant upside during 2017, according to Davy Stockbrokers.

In its inaugural conviction list, the firm selected the stocks it believed had the greatest potential this year from the 120 companies it covers.

Betting group Paddy Power Betfair could see the biggest upside to its share price this year, with Davy reckoning it could rise as much as 30pc.

Shares in insulation maker Kingspan had a potential 24pc upside in 2017, while at diversified group DCC, the potential upside was 26pc, according to Davy.

The broker said its picks were based on rigorous bottom-up analysis. It selected stocks based on a company's ability to grow revenue regardless of the underlying environment, and also preferred firms that could convert profits to free cash flow.

Capital discipline was also a necessary trait, and selected companies must have the ability to deploy capital to grow the business, improve returns or reward shareholders.

Davy added that Ryanair shares had an 11pc potential upside, while at hotel group Dalata, shares could rise as much as 18pc.

In financial stocks, Davy said the best sectoral bets were Bank of Ireland and Permanent Tsb. "The recovery of the Irish mortgage market remains the great prize for the Irish banking sector," the broker said. "The recent introduction of a Government help-to-buy scheme and the relaxation of macro-prudential rules for first-time buyers have hastened this eventuality. Ptsb remains the purest way to play this, while Bank of Ireland will also benefit from rising bond yields in reducing its pension deficit."

Davy also pointed out that hotel group Dalata still had about €30m to spend on hotel acquisitions in Ireland.

Dalata is Ireland's biggest hotel group and is benefiting from robust demand coupled with a shortage of bedrooms.

Dublin currently has a shortfall of about 4,000 hotel bedrooms.

"Until resolved, room rates will continue to increase, benefiting Dalata," the broker said.

Davy also said that builder Cairn Homes was a top sectoral pick, with the company set to benefit from its ownership of a significant land bank and continuing government stimulus for the sector.

Anglo-Irish exploration firm Tullow Oil was also a top sectoral pick for Davy, and would benefit from rising oil prices.

Irish Independent

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