Stock picks show it’s better the devil you know in chummy world of investment banking

Canaccord Genuity equities analysts have given their 26 top sharemarket picks for 2022 – and Canaccord appears to be the investment bank of choice for more than half.

‘We’re very strong on independence of analysts’ views. An analyst always has a view and we don’t get too involved. The analyst has the ultimate view on the stock.’ Picture: AAP

In a note to clients, Canaccord Genuity equities analysts on Tuesday outlined their 26 top sharemarket picks for 2022 – and it appears to be the investment bank of choice for more than half of them.

Among its top picks for the year ahead are retailer City Chic Collective, whose shares have plunged 18 per cent over the past week (and dropped 8 per cent on Tuesday alone), healthcare stock Alcidion, down 20 per cent since early December, and Marley Spoon, down 15 per cent since the start of the month.

Canaccord head of research Aaron Muller said it was no surprise there was such a skew towards companies the investment bank had a past history with.

“We tend to raise capital for companies that we like; we’ve raised capital for a lot of companies that we cover,” Mr Muller told The Australian.

But there was no pressure on analysts to push a stock, he said.

“We’re very strong on independence of analysts’ views. An analyst always has a view and we don’t get too involved. The analyst has the ultimate view on the stock.”

Canaccord was the joint lead manager for City Chic’s $90m raising in mid-2020, facilitated Marley Spoon’s IPO in 2018 and a 2020 equity raising for the company, and acted as joint lead manager for Alcidion’s $55m raising completed just weeks ago.

While City Chic is still trading above the 2020 equity raising price of $3.05 a share, Marley Spoon is another story: the meal kit company’s current share price of 85c is well below the $1.42 IPO price and the $3.22 it priced its equity raising at.

A City Chic store, above. City Chic’s US business is performing well and the Australian and New Zealand operations were boosted by border reopenings in the run-up to Christmas, Canaccord analysts say.

“We believe City Chic will exit fiscal 2022 with substantial sales momentum across its businesses and an opportunity to accelerate brand awareness via a number of major marketplace partnerships that it has signed during the year,” Canaccord analysts said in the note written before the share price plunge.

“Recent concerns regarding the UK supply chain (accounting for around 15 per cent of group sales) are overdone,” they added.

City Chic’s US business was performing well and the Australian and New Zealand operations were boosted by border reopenings in the run-up to Christmas, the analysts said.

Despite the optimism, the retailer’s shares have endured a horror run of late, diving from a high of $6.70 in October to $4.48 at the end of Tuesday’s trade. Canaccord has a target of $7.50 on the stock.

Another of Canaccord’s top picks, Toys “R” Us ANZ (formerly Funtastic), also chose the investment bank as its joint lead manager for its $30m raising in October 2020.

“TOY is in the embryonic phase of relaunching the Toys “R” Us and Babies “R” Us brands in ANZ, and, in our view, enters 2022 with building momentum,” the broker’s retail analyst said.

“TOY’s November trading update illustrated the company is scaling rapidly with evidence of accelerating revenue growth (+140 per cent in November 2021), supported by best-in-class unit economics.”

The broker is expecting “meaningful delivery” against the company’s medium-term targets this year, coupled with the brand relaunch in the UK, which it says “should illustrate the long-tailed opportunity ahead”.

The stock last traded at 16c and is down 11 per cent since the start of January. Canaccord’s target price is 25c.

Alcidion, which raised $55m in December to scoop up UK patient administration software company Silverlink, has fallen more than 20 per cent since the acquisition announcement.

It is trading at around 26c, well below Canaccord’s 35c per share target price.

“Alcidion’s recent acquisition represents a positive addition to the company’s Miya software suite,” Canaccord said.

“We look forward to ongoing new contract additions, including near-term success in cross-selling Miya into existing Silverlink sites.”

Another thread links the healthcare stock with Canaccord: One of Alcidion’s non-executive directors, Daniel Sharp, was an executive director of corporate finance at Canaccord from 2012.