Broker tips: SABMiller, Dunelm, Ashmore

11th Oct 2010 12:40

Investors expecting brewing giant SABMiller's performance to regain some fizz may have a while to wait, Nomura Securities suggests."We think that short-term expectations of a renewal of volume growth towards company's medium-term guidance may be unrealistic. We still expect mixed news flow in the key markets of the US, Europe and South Africa, with the impact of the VAT increase in Colombia holding back renewed strong top-line momentum in Latin America," said Nomura analyst Ian Shackleton.The brewer is due to announce results next Monday, and Nomura expects first half volumes will be unchanged on the corresponding period of 2009, though that does suggest a small improvement in the second quarter, with volumes seen rising 1% year on year, though that is against softer comparative figures."Stripping out the impact of Asia (c.2-3% of profits), we think that Q2 [second quarter] volumes would be running negative -1%," Shackleton said.The broker has bumped up its earnings forecasts by 2-3% to reflect favourable currency movements but it has reduced its figure for full-year volume growth from +3% to +2%.Despite the currency tailwinds the company is enjoying, the broker is sticking with its target price of 1900p for the stock and retains its "reduce" recommendation.It's a case of "snooze and you lose" at bedding and home furnishings retailer Dunelm, with broker KBC Peel Hunt advising its clientele to wake up to the investment appeal of what is "stacking up to be the most compelling organic roll-out story in the UK general retail sector."The broker has initiated coverage on the retailer with a "buy" recommendation and a 520p price target. It thinks the company has plenty of scope for growth in the UK, where it operates from fewer than 100 superstores. The company is targeting an estate of up to 200 stores, the broker notes, and with recent openings paying back their investment within two years, Dunelm is set to "continue to deliver margin growth", Peel Hunt analyst John Stevenson believes.Dunelm is currently "top of the league tables" in the broker's retail universe. "Dunelm offers the highest ROCE [return on capital employed] of the store-based retailers in our universe and the highest level of fixed charge cover. In our operational gearing test (profit before tax impact of a 5% sales cut), Dunelm is also the sector's best performer, beating all retailers - including ASOS," Stevenson concluded.Singer Capital Markets expects Ashmore to announce increased assets under management (AUM) in its update for the July to September quarter.The investment management group reported AUM of $35.5bn for the year ended June, and the broker anticipates that the update will reveal an increased figure by 10% to £39bn, following a strong three months for the company.Ashmore focuses on a number of investment themes including external debt, local currency, special situations (incorporating distressed debt and private equity), real estate, corporate debt and equity.According to analysts Sarah Ing and Steve Keeling, "both dollar debt and local currency funds appear to have been performing strongly during the past three months with Ashmore's 'emerging markets liquid investment portfolio' [(debt fund)] up some 10.2% since the end of June."There has been a significant slowdown in redemptions, which peaked during 2009 at 41% of average AUM. Redemptions have subsequently fallen to more historic 'normalised' levels of around 12%.The broker expects Ashmore's earnings to see a positive momentum given the outlook for emerging markets and returns in currency/debt. Therefore, its 'buy' status has been reinforced. The broker has a target price of 360p for the stock.