Broker snap: Sage, Hargreaves Lansdown, Pace

19th Apr 2010 13:50

Though sorry to see Paul Walker go, Panmure Gordon thinks Sage chief executive Paul Walker could not have chosen a better time to announce his decision to step down, as the going should start to get easier now for whoever succeeds him."An ability to drive 'growth' is the key ask for the new CEO [chief executive officer]. In our view, the two top candidates are Paul Harrison FD [finance director] and Paul Stobart Head of UK/Ireland - both board members, both highly capable and both Sage stalwarts," states Panmure analyst George O'Connor."While we envisage a soggy share price we do not see any big move - arguably the share price would respond favourably as the new head honcho will drive growth. With results pending (5 May) we make no changes to forecasts, recommendation and target price," the broker said. Singer Capital Markets is upgrading its earnings estimates for Hargreaves Lansdown after the wealth management firm said the first three months of 2010 represented the best quarter ever for the company's fund management arm."Given the higher than forecast pace of AuA [assets under administration] growth and revenue run rate, we are upgrading forecasts for the current year ended June by 5% with EPS [earnings per share] (pre-exceptional moving costs) rising from 13.0p to 13.6p. The impact on the next full year is greater with EPS rising 8% from 16.6p to 17.9p," the broker said.Singer believes the shares remain a core holding within the sector, even though they are "reassuringly expensive". The high value put on the shares by the market represents "stability of earnings, strong organic growth, recurring revenues, lack of performance risk and earnings momentum," Singer analyst Sarah Ing maintains.The stock remains inexpensive in finnCap's view, though it expects the shares to "trade sideways as the new calendar year seasonality takes effect and the market looks for forecast upgrades towards the end of the year."Priced at 23 times projected earnings per share for calendar 2010, the shares are not cheap but Singer "sees no catalyst for a derating." As such, Singer considers the shares as "fair value". It has a price target for Hargreaves Lansdown of 390p.Set top box maker Pace was one of the worst performers on Monday morning after a trading update in which it said it expects to meet market expectations for the full year.The market expressed disappointment at expectations of a "modestly lower ASP" (average selling price) in the second half of the year as a result of continued demand for old-tech low-price products such as digital television adapters, but stockbroker finnCap is more focused on demand for high-tech high-price items such as 3D TV with the FIFA World Cup coming up soon."Several matches, although reportedly not England qualifying ones, will even be filmed in 3D which has resulted in many networks pulling orders forward to capture viewers attention. We recall that when DirecTV launched HD [high definition] for the Super Bowl, demand for HD boxes actually continued to increase throughout the rest of the year as consumer exposure to the new format increased. This World Cup could therefore have a lasting legacy in certain parts of the globe, at least as far as Pace is concerned," analyst Paul Cornelius suggests.