Broker tips: Rolls-Royce, Capita, Morgan Advanced Materials

25th Jul 2013 11:53

Investec has maintained its 'buy' rating and 1,350p target price for Rolls-Royce following the engine maker's better-than-expected first-half results on Thursday."RR has been one of the best performers in the sector year to date (+36%) and on an FY14E price-to-earnings of 16.1x, is the highest rated global aerospace and defence company on this measure," said analyst Andrew Gollan. "We continue to believe that a premium rating is fully justified by long-term growth and cash improvement as momentum in the Civil Aerospace segment increases."Westhouse Securities has reiterated its 'sell' rating and 813p target price for outsourcing giant Capita, saying that stock remains expensive following its in-line first-half results."We believe that the current level of valuation requires a significant and sustained return to historical levels of organic growth that we believe will prove very challenging to deliver," the broker said.Jefferies has upgraded its recommendation for Morgan Advanced Materials from 'hold' to 'buy', saying that the diversified materials business is potentially at a turning point."In truth, we are kicking ourselves for not turning more positive when the shares were c260p, but we still believe there is attractive potential upside from these levels. The group's valuation is attractive looking out to FY14, in our view, and that there are a number of good businesses within Morgan," Jefferies said.BC