Broker tips: Johnson Matthey, Aegis, Elementis

6th Jun 2011 12:36

Credit Suisse keeps its 'neutral' rating and 2,200p target price on speciality chemicals group Johnson Matthey, as positivity in short-term drivers is met with the broker's cautious stance on the group's balance sheet.Research analyst Rhian Tucker notes that "Car production growth remains good with little sign of slowdown in China. Japan is having a small impact but this should be over post first half 2011/12 (cost circa £5m)."However, cash-flow has been limited by heavy working capital build, planned capital expenditure and restructuring costs, and Credit Suisse does not see this improving in the near-term.Prime Markets recommends to 'buy' Aegis shares, as it believes the stock remains attractive at current levels with or without the Synovate sale going through.UK advertising and marketing group Aegis confirmed speculation on Monday that it is in talks with the research think tank Ipsos about a "potential transaction" of Aegis's market research business Synovate. Even without taking this deal into account, head of dealing at Prime Markets Richard Curr thinks that the group has shown solid growth already in the current year.He adds that a £500m injection from a potential Synovate sale could really "put some fizz" into the share price. A target price of 154p is confirmed.UBS has initiated coverage on speciality chemicals supplier Elementis with a 'buy' and target price of 185p, and anticipates further upside in the future."Elementis has been successfully repositioned over the past few years and the shares have performed strongly as a result," the Swiss investment bank said.The firm owns and operates the only high-grade hectorite (clay mineral) mine in the world, which UBS believes gives it a unique product offering.UBS expects further upside to come as Elementis is trading at around a 20% discount to its UK chemical peers, "which we believe is unreasonable," the broker said.---BC