Broker tips: Aviva, Barratt Developments, Hampson

17th Aug 2009 13:14

Insurance giant Aviva was one of the few blue-chips to make headway on Monday morning, thanks to an upgrade from HSBC.HSBC is now neutral on the stock, having previously recommended its clients be underweight in Aviva, following the decision by the insurer to rebuild its capital buffer through a partial listing of its Dutch unit Delta Lloyd and a cut in the dividend.The price target has been raised to 400p from 320p.The long awaited rights issue from cash-strapped Barratt Developments could finally be about to happen, according to the Mail on Sunday, with the announcement scheduled to coincide with the housebuilder's full year results. Broker Panmure Gordon believes the report is on the money, otherwise the group's tangible gearing ratio likely to hit a worrying 86% at the year-end, with further write-downs still likely despite signs that the house market is stabilising. 'In our view, housebuilders are now at a crucial stage in terms of debt management, with a number of housebuilders (including Barratt) indicating that they will start new sites and may look to re-enter the land market. We continue to believe that Barratt will need to undertake a dilutive fundraising in order to secure its debt position and give it a foothold to start growing again,' the broker said. Panmure Gordon has reiterated its 'sell' recommendation and its target price of 145p.The sale by aerospace and specialist engineering group Hampson of its subsidiary Hampson Aerospace Machining subsidiary will dilute earnings this year, broker KBC Peel Hunt believes, but the good news is that it will bring down debt, 'The deal looks to be approximately 3% earnings-dilutive in the current year but importantly reduces our March 2010E net debt forecast to £120m (2.5x EBITDA),' the broker said, adding that the disposed of operations contributed £2.3m to profit before tax in the year to March 2009. As a result of the disposal KBC Peel Hunt has changed its profit before tax estimate for the current year to £33.1m. The broker has kept its recommendation at 'hold' pending the issue of Hampson's interim management statement on Wednesday, 19 August.