Broker tips: Thomson Reuters, Legal & General, JD Wetherspoon

23rd Jun 2009 12:39

The decision by Thomson Reuters to can its London listing may have been triggered by management's frustration in the persistent discount at which the shares trade to their NYSE-listed counterparts, Charles Stanley believes.Since announcing the decision to unify its dual listed company structure London quoted shares have risen by about 5% in price but still trade at a discount of around 4% to the American shares quoted on the Toronto and New York exchanges.The uptick in the share price today merely adds to Charles Stanley's conviction that the rally in the PLC's shares has gone too far."The annual nature of contracts means the business is late cycle, and therefore the full impact of the global financial crisis on the Markets division (47% 2008 profit) may only start to be felt in Q3/4 of 2009. The Professional division (53% 2008 profit) is likely to be more resilient, but is also likely to encounter economic headwinds," analyst Sam Hart writes.The broker has retained its "reduce" recommendation ahead of the company's second quarter results, due on 6 August.However, Numis Securities has raised its price target for the London quoted shares from 1841p to 1918p, to reflect the elimination of the discount to the North American shares.Legal & General was the worst performing blue-chip in early trading on Tuesday after Societe Generale (SocGen) recommended selling the shares.SocGen previously advised holding the shares. It has cut its earnings estimates for the current financial year and next, resulting in a reduction in projected earnings per share of around 2p in both years.'Although we do not expect significant additional default risk provisioning, implying an improvement in risk product margins, we do expect L&G [Legal & General] to continue to struggle in savings products as a result of lower asset balances, which in turn generate lower fees (and this despite its increased focus on reducing costs)," the broker said.Morgan Stanley sees pub group JD Wetherspoon as a "long term winner" in the pub sector and reckons the slide in the company's share price since mid-April offers the opportunity to get a round of shares in at a good price."With the shares off 18% in the last three months, we think the refinancing risks are well reflected in the price," Morgan Stanley states, after upgrading its rating on the stock from "underweight" to "overweight". The US bank's target price for the cut price food and ale purveyor has been lifted to 480p from 440p. The target price, if achieved, would comfortably beat the stock's 52-week high."Its market share gains are accelerating, and we expect it to continue to generate 2-3% (like-for-like) sales growth in the medium term, enough to drive consistent double-digit EPS growth," the US bank said.