Broker tips: Premier Foods, Regus, JD Wetherspoon

27th Apr 2010 12:57

Premier Foods finds itself in a bit of a pickle after reporting a 5.1% decline in first quarter sales but FinnCap sees some elements of cheer in a generally downbeat trading statement."The good aspects to the update today are that H1 [first half] net debt is expected to be £100m lower (which compares with past pointers to a reduction of this order YoY [year on year], so perhaps full year debt reduction will now be better) and branded volumes have grown by 2.2% outpacing market growth in the categories Premier operates in of 0.8% so share growth has been achieved," analyst Charles Pick notes.Comparative figures for revenues from own label operations will also become less demanding as the year progresses, reflecting the group's decision in the second half of last year to discontinue some lines."On the debit tack, group sales are 5.1% lower, comprising slippage from branded sales of 0.3% and from non-branded of 12.9% with poor performances from the Core (-1.1%) and Defence (-6.7%) brand categories and even the Drive brands (where marketing resources are being focussed) have only increased Q1 sales by 3.4% due to volume growth of 6.6% being offset by an adverse mix/price effect of 3.2%," Pick adds.Though the absence of a dividend is a drawback FinnCap thinks the shares are worth holding as they current trade on a projected price/earnings ratio of 6.Citigroup has started coverage on serviced office group Regus with a 'buy' stance and 145p target price.Regus is the global leader in the fragmented serviced-office market with operations in 78 countries. This network is a key differentiator in helping companies to expand into new markets as well as offering them a potential solution to reduce their property costs, the broker suggests.The number of mobile/remote workers is set to increase to 1.1bn by 2011 and Regus with its combination of serviced offices, business lounges and virtual office services is well positioned to benefit.Citigroup adds that this extensive network, strong medium-term growth opportunities and 20% discount to its long-term forward 12-month EV/Revenue average means there is also upside on a 12-month view.A rising property market may be good news for the overall economy but it is a 'risk' for the budget pub chain JD Wetherspoon, according to the broker UBS.However, the stock remains UBS's top pick in the pub sector and the broker raises its target price on Wetherspoon to 590p from 530p.'Given the risk of the property market recovering and of new entrants such as Mitchells & Butlers for leased pubs, we believe Wetherspoon will open 50 new pubs, this fiscal year and 55 next,' the broker says.'Our five year forecast of 200 new sites remains below the company's 250 target.'Nevertheless, this is enough to prompt UBS to raise its target price on the stock, which is in line with the shares' historic average.