Broker tips: Legal & General, Halfords, Carpetright

23rd Mar 2010 13:06

The capital position at Legal & General is looking increasingly attractive and with the prospect of improved dividend payouts Panmure Gordon is happy to reiterate its 'buy' recommendation after the insurer's 'excellent results' on Tuesday morning.'We believe that these results addresses many of the concerns that have hung over L&G [Legal & General] over the past 12 months, and should help move the share price towards its 2009 year end EV [enterprise value] of 114p/share,' stated Panmure analyst Barrie Cornes.The broker has a target price of 99p for Legal & General. Car parts and cycle retailer Halfords raised profits guidance for the current year when it made its pre-close trading update, though the decision to close down its fledgling Central European operations was a less welcome surprise.The group will close down the seven stores it has in the Czech Republic and Poland this summer, taking a £7.9m charge for doing so, of which £4.5m will be non-cash. Singer Capital Markets said the move 'will allow management to fully focus on the core UK retail business as well as developing the recently acquired Autocentres business,' a view echoed by Sam Hart at Charles Stanley.'Clearly, it wishes to focus on integration and expansion of the AutoCentres business in the medium term and does not want to run the risk of becoming overextended,' Hart said.Halfords' management has indicated the profit before tax in the current year is expected to be in the range of £114-116m, slightly ahead of the market consensus of £113m.Both Singer and Charles Stanley highlight the stock's defensive properties. 'With its defensive, needs-driven offer and market-leading positions the core Halfords retail business looks well positioned, as highlighted by this statement, while the new autocentres offer the group a significant new growth angle in the UK. The dividend yield is also attractive at 4.6% and debt levels are set to reduce rapidly paving the way for further strategic acquisitions,' Singer believes. The broker rates the shares a 'buy' and has a target price of 510p.Charles Stanley is a little more circumspect after the share's recent strong run, and advises its clients to 'accumulate' the shares, taking advantage of any market weakness. A profit warning from floor coverings retailer Carpetright has prompted KBC Peel Hunt to downgrade the shares.Carpetright said like for like (LFL) year on year sales growth in the 7 weeks to 20 March was 1.4%, compared to the previous quarter's growth rate of 2.3%, and while some of that tail off can be attributed to the bad weather in the early part of 2010, the retailer has not seen a return to fourth quarter 2009 growth rates since the snow melted.KBC Peel Hunt had been expected a bounce back in trading, with the carpet seller continuing to benefit from the demise of Allied Carpets. The rebound has not proved as strong as anticipated so the broker has cut its 2010 profit before tax estimate from £37.5m to £27.8m, while the forecast for 2011 is chopped to £37.5m from £48.2m.The broker has cut the stock from 'buy' to 'hold' and cut the target price from 1,150p to 1,000p.