Broker tips: Barratt Developments, Restaurant Group, NCC

12th Jan 2011 12:42

Financial services firm Matrix places Britain's largest housebuilder Barratt Developments in its 'add' category as the group reported trading in line and recovering margins.The broker notes that net asset value per share (209p estimated for 2011) remains a primary driver of value for the group, and "with the level of operating margin now recovering, there should be some growth in this measure in the current financial year."The group reported a 6% improvement in average sales prices to £176,000 in the half year to date, but this was due to product mix rather than house-price inflation, says analyst Simon Brown."The cheaper land acquired over the last 18 months should start to influence the margin achieved on unit sales at an increasing rate as the fiscal year progresses," says Brown. New land acquired is reported to be margin enhancing to the tune of up to 10 percentage points.A target price of 105p and 'add' rating is confirmed. Charles Stanley Securities advises its clients to add more shares in The Restaurant Group (TRG) to their plate after the company announced that profits should be just ahead of market consensus, showing "resilience despite a tough year."Analyst James Dawson says that a drift-off in 2010 like-for-like sales performance to -1% seems understandable given the "extreme weather conditions during December set against the backdrop of a nervous consumer."The group, which owns the Garfunkel's, Chiquito and Frankie and Benny's chains, confirmed that 24 new sites were opened in the year, and reaffirmed the target opening range of 22-27 for 2011.Charles Stanley says that the group has consistently remained cautious with its debt remains position, and expects TRG will report an improved net debt position year-on-year in the final results as positive cash flows continue even post the expansionary capital expenditure.The broker says the trading update provides reassurance and its near-term outlook remains unchanged. An 'add' rating and target price of 330p are retained.Financial advisory firm Collins Stewart expects shares in IT security assurance specialist NCC Group to keep on rising, and rates the company a 'buy' with a target price of 700p."The exceptional profitability, consistent cash generation and circa 90% recurring revenue of the software escrow division, together with the industry-leading expertise, strong demand and scarcity of supply in the assurance business, constitute a highly attractive combination which justifies a premium valuation in our view," said analyst Jonathan Imlah."The recent Wikileaks scandal provided a timely reminder of the vulnerability of corporations and governments alike to cybercriminals and so-called 'hacktivists,'" said Imlah. He adds that NCC is ideally positioned to capitalise on this "escalating cyber war."Despite shares being around 50% higher than at the same time last year, the broker says that the group's valuation "fails to reflect the strategic worth of the assurance business," expecting further upside in the share price.The interims on 20 January are expected to confirm the trading momentum, and with the results usually weighted at a 40:60 ratio in favour of the second half, the broker expects the acquisition of US-based security testing business iSEC Partners in October to further pronounce this bias.