Broker tips: Capita, Halma, FuturaGene

3rd Dec 2009 12:55

Broker KBC Peel Hunt has initiated coverage of outsourcing giant Capita with a 'buy' recommendation and a price target of 800p, stating that 'there are more opportunities than ever facing the business.'The broker reckons the trend towards outsourcing in both the private and public sectors will continue and the recent dip in the share price of Capita represents a buying opportunity.'Just 6% of a £94.2bn potential UK market (according to industry analysts) is currently outsourced, and we believe the recent downturn will drive further development of the BPO [business process outsourcing] market. The public sector also presents a greater than ever need (and demand) for outsourcing,' claims KBC analyst Henry Carver.Results from engineering conglomerate Halma were towards the top end of expectations, Panmure Gordon reckons, reinforcing its conviction that the shares are worth buying.The group indicated it expects margins to improve in the second half of its financial year. 'Added to better than expected cash generation and an improved book to bill, the recovery gradient in its Industrial Safety division could provide some interesting momentum,' reckons Panmure analyst Oliver Wynne-James.Lower net debt and the potential for bolt-on acquisitions adds to the investment case, the broker believes. 'There is also the potential of a revenue surprise in February and March 2010E given the weak comparable,' Panmure Gordon notes.The broker's price target for Halma remains 275p.Evolution Securities went out on a limb in October and described plant yield technology stock FuturaGene as the 'trade of the decade' so it was understandably pleased to see the company's share price soar on Thursday morning on the back of a licensing deal with Bayer CropScience, a subsidiary of German drug making giant Bayer.Bayer CropScience has been granted exclusive worldwide rights to use a FuturaGene drought tolerance technology in cotton. 'This is the first significant customer for FuturaGene's drought genes; up to now its many deals with industry majors have related to its yield enhancing technology which boosts growth of plant cell walls,' notes Evolution analyst Philip Sparks.The deal followed hot on the heels of Monday's £3m fund raising through a share placing, which means long term investors can 'buy the shares without having to worry about the financing risk,' Sparks asserts.Evolution has a 'buy' recommendation and a 100p price target for FuturaGene.