UK MARKET TALK ROUNDUP: BROKERS COMMENTS

13th Jul 2010 08:04

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] 0704 GMT [Dow Jones] Dunelm (DNLM.LN) has delivered better-than-expected final trading results, says a trader. The trader says combined with stronger gross margin performance, this will lead to an increase in consensus pretax profit estimates to GBP76M-GBP77M from just under GBP74M. Additionally, year-end net cash of around GBP11M is also better than anticipated. "Overall, the results underline the quality and growth potential of the company." Shares +0.6% at 360p. ([email protected]) 0700 GMT [Dow Jones] Goldman Sachs upgrades McBride (MCB.LN) to buy from neutral. Thinks the share price reaction to concerns over cost inflation has been excessive. Says the share price has factored in a significant fall in EPS following the company's cost inflation warning in June. Thinks this will reverse as the actual extent of earnings loss becomes clearer and McBride will re-rate as the company updates the market on FY '11 guidance, most likely during the preliminary results. Cuts the price target to 166p from 225p. Shares closed Monday at 133p. ([email protected]) 0659 GMT [Dow Jones] Northern Foods's (NFDS.LN) update shows worryingly poor trading for 1Q, says Shore. The brokerage is concerned by the near-25% fall in sales from the group's frozen division. It notes management's statement about its focus on initiatives to drive growth. "There may be promise but at some stage there needs to be greater evidence of delivery otherwise we will have to start thinking in earnest about changing our dividend expectations for Northern Foods." Keeps the stock at hold. Shares closed Monday at 47p.([email protected]) 0656 GMT [Dow Jones] AMEC (AMEC.LN) is well placed to deliver a strong performance in the Azerbaijan region, after announcing a five-year deal with BP (BP.LN) to provide project management, engineering and construction management services in the region, says Shore Capital. AMEC has worked with BP in Azerbaijan for 13 years, says Shore. The brokerage says the newsflow on new contract wins, bolt-on acquisitions and performance delivery are likely to remain strong in the medium term and as such, it keeps a buy rating. Shares closed Monday at 871p. ([email protected]) 0651 GMT [Dow Jones] Goldman Sachs downgrades Dairy Crest (DCG.LN) to sell from neutral and cuts target price to 337p from 395p. Notes the company falls into the bottom quartile of earnings growth and cash returns relative to mid-cap peers. Also says Dairy Crest's pension liability represents more than 20% of market cap, which Goldman reckons will weigh on the shares as worries about leverage remain. Says the group's 1H results in November will likely show the potential effects from weak UK consumption. Says this could act as a catalyst for share price underperformance. Shares closed Monday at 402p. ([email protected]) 0648 GMT [Dow Jones] Luminar's (LMR.LN) interim management statement is in line with expectations says Altium. Says trading over the first 19 weeks of the full year remains challenging. Says gross margins for the period are broadly in line with last year and encouragingly, given the trading backdrop, Luminar reiterates that it expects to achieve GBP10M of cost savings in the '10/'11 financial year. In terms of valuation, says the group will be loss-making this year. Says: "We need to see an improvement in the wider economic environment and in particular the level of youth unemployment before Luminar can rebuild its profitability." Has Luminar at hold with 16p price target. Shares closed at 12p. ([email protected]) 0630 GMT [Dow Jones] Dunelm's (DNLM.LN) trading update is reassuring, says Arden Partners. Says 4Q sales are not as bad as feared. Notes a small upgrade to consensus and says it will be raising its pretax profit estimate for '10 to GBP76M from GBP73.5M. Reiterates add rating and 390p price target on the stock. Shares closed Monday at 358p. ([email protected]) 0621 GMT [Dow Jones] Burberry's (BRBY.LN) first-quarter trading update shows very good numbers, Investec analyst Katharine Wynne says. Adds she would be surprised if the stock does not rise on the results. Keeps hold rating. Shares closed Monday at 789p. ([email protected]) 0557 GMT [Dow Jones] Numis Securities initiates coverage of Hochschild Mining (HOC.LN) at hold with a 330p target. "We believe Hochschild has limited growth from current operations and is now looking to shift from silver to gold, driving the company forwards with its strategic investments and earlier stage exploration properties." Numis expects Hochschild to remain active in M&A, looking to increase its investments or pursuing new opportunities. It sees some near-term upside to its target price, but not enough to form an overly bullish view on the stock at this stage. Shares closed Monday at 306p. ([email protected]) 0554 GMT [Dow Jones] Morgan Stanley initiates coverage of Cable & Wireless Communications (CWC.LN) at equalweight with a 72p price target. The dividend for FY '11E is attractive and should provide solid support for the shares. But Morgan Stanley sees no imminent catalysts and does not factor in a recovery in the Caribbean until FY '12. It acknowledges the improved operating performance, particularly in Macau and Panama, but sees better upside elsewhere in the sector. The bank says the 21% upside implied by the price target is lower than that of mid-cap stocks Freenet (FNTN.XE), Iliad (ILD.FR) and TalkTalk Telecom (TALK.LN), rated at overweight. CWC shares closed Monday at 59p. ([email protected]) Contact us in London. +44-20-7842-9288 [email protected] (END) Dow Jones Newswires July 13, 2010 03:04 ET (07:04 GMT)