Broker tips: AB Foods, Thorntons, Centamin Egypt

13th Sep 2010 11:14

Investors should switch out of AB Foods into Unilever following today's trading update from the sugar giant and Primark owner, advises Charles Stanley.Forecasts of a 6% increase in like for like sales at discount clothes store Primark during the 53 weeks to 18 September is down from 8% rise for the first six months. That implies a slowdown to 4% growth in the second half versus 9% the year before.Charles Stanley's Jeremy Batstone-Carr thinks it "highly unlikely" that estimates will be raised in the wake of today's update as the strong performance had been anticipated. Attention is likely to focus on cautious comments on retail operations in 2011."We now look forward to the likelihood of lowered estimates for 2011 in due course and given that the shares trade at a premium PE (price/earnings) multiple to the sector and our preferred Unilever we maintain our Reduce recommendation and continue to advise investors to switch from AB Foods to Unilever," writes the analyst. Last week's results from Thorntons were "the latest in a series of disappointing years" for the chocolate maker, convincing finnCap to downgrade 2011 forecasts and remain sellers.Pre-tax profit fell by 2.4% to £6.1m in the year ended 26 June 2010, broadly in line with guidance. The broker wanted £6.2m."With pressure on gross margins resulting from raw material price increases and sales mix changes, we have reduced our FY11 PTP (profit) forecast from £6.8m to £6.5m," finnCap said Monday. Its target price stays at 70p.Centamin Egypt fell as much as 13% at one stage this morning after revising down 2010 gold production estimates, but Ambrian thinks all the problems are only short term, so keeps its 'buy' stance.Full calendar-year production guidance was dropped from 200,000 ounces (oz) for 2010 to 160-170,000oz, and cash costs are now likely to be US$400/oz as opposed to the "lower than US$400/oz" previously guided. "Taking into consideration: 1) the production downgrade; 2) the gold price having dropped US$10/oz since last Friday morning; and 3) that Centamin's share price reached a record high last week, it's not rocket science to suggest that we might see some profit taking today," reckons Ambrian, which acts as broker to and as a market maker to mid-cap Centamin.But it expects the stock to end the day higher relative to this morning's price.