Esure hit a record high on Tuesday amid hopes that surging car insurance premiums will translate to fatter dividends.
Canaccord Genuity added Esure to its “buy” list as part of a sector review. It forecast motor insurance pricing to keep rising at the current pace until the end of 2017, having jumped 16 per cent year on year in the first quarter, and expected the larger insurers to take market share from weaker players following February’s rule change for calculating lump-sum compensation.
The pace of Esure’s expansion in a strengthening market deserves a higher valuation, the broker argued. And, with its capital position bolstered by the demerger of the Gocompare price comparison website, Esure can afford another special dividend on the back of a profitable year, it said.
“The company had previously suggested it would pay limited specials when the business is growing rapidly, but this link appears to have been broken,” said Canaccord. It put a 260p target on Esure, which closed 5.7 per cent higher at 258.9p.
The wider market took its direction from Wall Street with the FTSE 100 up 0.6 per cent, or 46.11 points, to 7,250.05.
Mail-order retailer N Brown rose 11.6 per cent to 266.3p after HSBC turned positive.
A shift online, which now contributes 69 per cent of total sales, opens up “structurally higher growth markets” and “improves N Brown’s ability to mitigate a challenging 2017-18 consumer outlook,” said HSBC, which put a 280p target on the stock.
Ocado gained 5.8 per cent to 265.5p on speculation that Marks and Spencer might partner the group for a planned trial of an online grocery delivery service.
The best outcome would be for Ocado to add M&S products to its website and deliver via its distribution centres, said Credit Suisse, which saw “limited value” in deploying in-store picking technology.
“Assuming a supply agreement approach, we would expect Ocado to see volume growth after filling the only mass-market product gap in its offering,” the broker said.
Auto parts maker GKN slipped 0.9 per cent to 355.5p after Ford and General Motors both reported steeper than expected declines in US car sales during April.
Jimmy Choo rose 3.6 per cent to 196.5p on speculation that the shoemaker could be a target for Coach, having last week put itself up for sale.
Coach declined to comment on its acquisition strategy and, given Choo’s advisers have yet to begin a formal auction process, dealers saw the speculation as likely to be overhasty.
A profit warning sent PureCircle sliding 6.6 per cent to 308.3p. The producer of stevia sweeteners said it was taking longer than expected to rebuild orders following January’s lifting of US import restrictions.
