Broker tips: Barclays, Sage, Brewin Dolphin

2nd Dec 2009 13:21

UK banks have been under the cosh since news of the Dubai debt situation broke last week but their shares are still not cheap enough, according to Credit Suisse.'UK bank share prices have fallen 10% in the last two weeks, but we calculate that they still imply long-term ROTE [return on tangible equity] at 11%, in line with our expectations and similar to the 1970-80s,' said Credit Suisse analyst Jonathan Pierce.In view of the risks associated with the whole of the banking industry at the moment, the Swiss bank remains cautious about the sector. 'In our view, investors wanting exposure should buy Barclays, but even here we believe market estimates remain too high.'Panmure Gordon, a long time fan of Sage, has retained its 'buy' rating on the software firm after final results that were as boringly predictable as one might expect from a company that serves the accountancy trade.The broker notes that the debt situation and US growth were both 'a bit better' than expected, but otherwise 'Sage is performing in line - this is a company that you could set your watch by.''At each turn we are impressed by Sage's new avenues and the consistent moves to increase customer wallet share, as its builds a suite of business software around its customers,' the broker concludes. Better than expected full year figures from its sector peer Brewin Dolphin have prompted broker Canaccord Adams to upgrade its 2010 earnings estimates by 4%.'We raise our target price from 180p to 193p, reflecting higher AUM [assets under management] compared with our previous assumptions, partly offset by lower surplus cash,' said Canaccord Adams analyst Katrina Hart.Assets under management by Brewin Dolphin rose to £20.5bn, versus Canaccord's estimate of £19.7bn.'We believe a modest premium is supported by evidence of real momentum in Brewin's business, over and above market gains. The likelihood of further earnings upgrades should help unlock the 20% potential upside we see in the shares,' Hart concluded.