Broker tips: Experian, pub groups, Debenhams

20th May 2009 12:40

Credit checking group Experian's own credit-worthiness is looking better after the company surprised the market with the amount of cash it generated in the second half of its financial year.Broker Charles Stanley said the pre-tax profits of $843m were ahead of market consensus of $805m, but 'the big beat is in cash flow with net debt falling by $0.6bn to $2.1bn. The strong cash generation in the second half of the year is what we want to see from Experian.'The broker is expecting the strong cash generation to continue in 2010 and reckons the shares look attractively priced. 'Overall, we were impressed with the strong cash generation and this opens up the possibility of higher dividends or a share buyback in 2010,' the broker said.Credit Suisse has been running the rule over pub groups as the sector has returned to favour, in line with the market's enthusiasm for the recovery prospects of highly geared companies.The Swiss bank reckons that the pub groups are likely to see further declines in rental income and property values this year, which will impede the rate of recovery.It highlights Enterprise Inns as its favoured stock in the sector. It expects the stock to out perform and has a price target of 224p.'Our preferred pick is Enterprise Inns, as we forecast the group will make progress reducing debt ahead of the May 2011 refinancing. As such, we expect its 2010 estimated calendarised P/E multiple of 4.5 to increase,' the bank said.It also raises a glass to JD Wetherspoon, rated 'outperform' with a price target of 448p, and Punch Taverns, which has a price target of 184p.It is less keen on the pub group/brewing combos Greene King and Marston's, both of which have 'neutral' ratings. The former has a price target of 464p, and the latter a price target of 172p.Meanwhile, pure pubs group Mitchells & Butlers gets the thumbs down, on the basis of its high exposure to food sales and the high proportion of mid-market pubs in its estate. Credit Suisse expects the stock to underperform and has a price target of 232p.Singer Capital Markets is singing the praises of department store Debenhams after returning from a preview of the retailer's new fashion ranges.'The show, whilst clearly displaying the individual trends and looks that are going to be key to the coming season, was also key to understanding the Designers at Debenhams range and the individual designer brands' identities,' the broker said.'This is an increasingly important factor behind Debenhams' success and will become more so once the targeted concession space is reduced over the Summer (0.5 million sq ft will be allocated to own brand merchandise, namely Designers),' Singer added.The broker reiterated its 'buy' recommendation for the shares, observing that the shares had come off the top recently, while 'in all likelihood we will see further upgrades in the remainder of the year.'