Broker tips: Land Securities, Ryanair, Carillion

11th Jan 2010 13:23

Real estate plays are in focus Monday as Goldman Sachs predicts more stable yields and a strong recovery in demand for prime office space.It thinks rising demand for office space, especially in Sweden and the UK, at a time when new supply is limited is likely to lead to a strong recovery in prime office rents from 2011.'After an extended period in which financial leverage has dominated share price moves, we see some attractive investment opportunities in the sector, most commonly where companies have exposure to offices and the UK or Sweden,' said the broker. It forecasts robust GDP growth for both countries Land Securities is added to Goldman's 'Conviction Buy List' and the price target raised to 801p from 750p to reflect exposure to London office rents, amplified through planned West End developments.Derwent London goes up to 'buy' from 'neutral' with target increased to 1,455p from 1,137p, and Segro to 'neutral' from 'sell' as its shares now trade in line with the broker's revised 12-month price target of 343p.But Liberty is cut to 'sell' from 'neutral' with 452p target despite some signs of recovery in the UK retail property investment market. Goldman believes occupier markets are likely to continue to face challenges, especially compared with offices.Shaftesbury gets the same treatment, with rents and valuations likely to become a relative disadvantage at a time of a cyclical recovery in commercial real estate prices. RBS has downgraded no-frills airline Ryanair to 'hold' from 'buy' after a 21% increase in the share price over the past two months. The rally was driven by the clarification of the equity story, since investors lacked strategic visibility and confidence in the equity story towards the end of 2009, but going forward RBS sees a dearth of potential catalysts to drive the stock at this time. RBS expects the airline to raise guidance at its third quarter results, but this is already anticipated by the market, while the proposed €1bn cash hand-back scheduled in late 2012 is a long way away.Having reshaped its portfolio through mergers and acquisitions activity for the past five years, 2010 should see support service group Carillion's emphasis shifting to organic opportunities, according to Morgan Stanley.The broker starts coverage on the stock with an overweight rating and a 380p target price. It notes that Carillion's primary value driver, the support services division, had a good track record of high single-digit revenue growth between 2004 and 2008, though this will remain under cyclical pressure.'Carillion is our preferred play on the prospect of increased public sector outsourcing,' says Morgan Stanley.