Broker tips: G4S, National Grid, Sage

16th Jul 2012 11:31

Both UBS and Jefferies have downgraded their ratings for security solutions firm G4S following the news that the company expects to incur a 35-50m pound loss on its London Olympics contract.UBS has cut its recommendation from 'buy' to 'neutral' and slashed its target price from 330p to 280p, saying that while the Olympics is a one-off, the issues will prompt broader changes (such as strengthening of internal controls) leading to an ongoing increase in costs.Meanwhile, Jefferies has lowered its rating from 'buy' to 'hold' and cut its target price from 330p to 285p, saying that the reputations negative associated with this contract may impeded G4S's ability to fully participate in forthcoming UK public sector outsourcing opportunities.Nomura has maintained its 'buy' rating and 730p target price for gas and electricity group National Grid despite Ofgem's proposals for the power and gas transmission (RIIO-T1) and gas distribution (RIIO-GD1) regulatory reviews for 2013-2021.Nomura says that the allowed returns are behind its forecasts and what the market was expecting. "Running a sensitivity based on the allowed returns versus our expectation suggests it could be a 2-3% negative on the NG share price," the broker said."However, it is important to note that these are headlines from the initial proposals and it is natural to expect for there to be differences between the negotiating positions of the regulator and NG at this stage - we could see positive movement from the regulator at the final review."Investec has trimmed its target price for accountancy software group Sage from 247p to 243p and retained its 'hold' rating as European weakness continue to hold back sales growth. "Trading on c15x FY12E PE, the stock is not particularly cheap and post the recent bounce, we expect it to fall back," Investec said.BC