UK MARKET TALK ROUNDUP: BROKERS COMMENTS

11th Jun 2010 10:41

Broker comments in the UK today. Compiled by Dow Jones Newswires Markets Desk, [email protected] Contact us in London. +44-20-7842-9464 [email protected] 0941 GMT [Dow Jones] UK housebuilders offer good value and their shares should perform better once the government's budget is out of the way, says Liberum Capital. Adds that sector underperformance has been driven by risk aversion. Says the budget on June 22 is almost certain to include an increase in capital gains tax, from 18% back to 40% or even 50%. Says this is potentially serious as it could lead to sales of second homes, but thinks the government will restore enough taper relief to protect the housing market. Tops picks are Barratt Development (BDEV.LN), Berkeley (BKG.LN) and Redrow (RDW.LN) rated at buy. Also highlights Persimmon (PSN.LN), rated at hold. ([email protected]) 0913 GMT [Dow Jones] Kentz Corporation's (KENZ.LN) orders backlog has increased since Decenber with rises in all three divisions, giving confidence of continued growth, says Evolution Securities. Analyst Keith Morris says the lack of deepwater or US exposure is a positive too as Kentz's bidding pipeline is unlikely to be affected by recent events in the Gulf of Mexico. Buy rating, 300p target. Shares up 1.7% at 237.0p. ([email protected]) 0848 GMT [Dow Jones] Panmure Gordon initiates MWB Group Holdings (MWB.LN) at buy, with 73p price target, saying the company is materially undervalued given the quality of its asset base. Notes a cash redistribution plan remains on the agenda, with the disposal of Liberty now pending, which has allowed management to achieve maximum value for shareholders. Adds the target price implies in excess of 80% upside potential. Shares flat at 40p. ([email protected]) 0846 GMT [Dow Jones] Fuller, Smith & Turner (FSTA.LN) continues to deliver an admirable performance, says Panmure Gordon. FY results are ahead of expectations, with pretax profit of GBP26.6M versus Panmure's estimate of GBP25.8M, says Panmure. It notes a strong annual dividend increase of 12% to 11p. "Fuller's continues to offer a rare and compelling combination of earnings and dividend growth, is conservatively financed, and offers good forecast upgrade potential." Reiterates buy recommendation and has 614p target. Shares +6.4% at 580p. ([email protected]) 0755 GMT [Dow Jones] Royal Bank of Scotland raises Premier Farnell (PFL.LN) price target to 275p from 260p following much better than expected 1Q results. Notes strong sales growth and margin improvement in all regions. "With May and June 2009 representing the trough during this cycle in terms of sales per day, the improving momentum currently being seen is not surprising, although its magnitude is greater than we expected." Expects the strategy to drive further outperformance. Keeps the stock at buy. Shares -1.7% at 240p. ([email protected]) 0655 GMT [Dow Jones] The approach for Brit Insurance Holdings (BRE.LN) should help the share price Friday, although this should not be taken as a definite signal that a deal is imminent or that a bidding war may start, says Execution Noble. Says the attraction of Brit is clearly its high dividend yield as well as the low valuation. Welcomes the interest back into the sector, given the brokerage's view that these stocks are significantly undervalued. Says: "This sudden introduction of bid speculation into the sector will clearly benefit all, particularly given the lowly valuations of not just Brit but the whole Lloyd's [of London] space." Keeps Brit at hold. Shares closed Thursday at 729p.([email protected]) 0650 GMT [Dow Jones] The approach by a private equity group to acquire Brit Insurance Holdings (BRE.LN) is good for the sector as a whole, says an analyst. Says if there is a resumption of interest in the sector, it should be positive for valuations even if the deals don't end up going through. Meanwhile, ahead of the open, a trader calls Brit Insurance up by around 3%. Shares closed Thursday at 729p. ([email protected]) 0645 GMT [Dow Jones] Hammerson's (HMSO.LN) acquisition of Leadenhall Court increases the size of the company's portfolio by only about 1%, so it is not material for forecasts, says KBC Peel Hunt. Says the building is let to March '14 and the passing rent of GBP7.2M implies an initial yield of 11%. Has Hammerson at buy with target price of 454p. Shares closed on Thursday at 358.5p. Elsewhere, says there could be a knock-out bid for the entire White Tower Portfolio, of which the Leadenhall Court city office building formed a part. ([email protected]) 0642 GMT [Dow Jones] Investec cuts its price target on Imperial Tobacco Group (IMT.LN) to 2010p from 2040p, and keeps its hold rating. Says Imperial Tobacco's shares are back around the 1900p level after a torrid April/May. Cites weak industry volumes, the loss of the OFT case, and the threat of plain packaging. Remains cautious on the stock and the sector, but thinks these fears have been overdone. Still, tweaks forecasts in the light of 1H numbers and subsequent movements in the forex markets. Says this leads to a small downgrade to FY '10 EPS estimate in actual forex, but an around 2% upgrade at constant forex. Says its long-term forecasts reduce by around 3%, principally for more adverse forex movements. Shares closed at 1897p. ([email protected]) 0633 GMT [Dow Jones] Barclays Capital upgrades GlaxoSmithKline (GSK) to overweight from equalweight, and keeps its price target at 1380p. Says investor concerns around Avandia and Advair are overdone. Adds the stock seems cheap with a dividend yield of 6.2%, a free cashflow yield of 12%, and 17% upside to BarCap's DCF valuation. Says in this climate boring is beautiful. Shares closed at 1164p. ([email protected]) 0626 GMT [Dow Jones] Morgan Stanley upgrades Reed Elsevier (REL.LN) to overweight from equalweight. Also lifts the price target by 20% to 600p, implying 24% upside. Says the stock is facing some late-cycle headwinds in '10 but improving underlying market conditions suggest a strong bounce-back in '11-'12. Thinks it is a good quality business with improved management. Says outperformance could be triggered by avoiding earnings downgrades in the interim results in July. Shares closed Thursday at 484p. ([email protected]) 0622 GMT [Dow Jones] Goldman Sachs downgrades Rexam (REX.LN) to neutral from buy. Sees more upside in other names in the sector. But raises the price target to 527p from 474p. Views Rexam as a high quality, high returns-generating company, supported by valuation. Also, the brokerage has a more positive view on beverage can volumes. Adds that the increase in the price target implies 68% potential upside. Shares closed on Thursday at 317.3p. ([email protected]) Contact us in London. +44-20-7842-9288 [email protected] (END) Dow Jones Newswires June 11, 2010 05:41 ET (09:41 GMT)