UK MARKET TALK ROUNDUP: BROKERS COMMENTS

23rd Jul 2010 10:58

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] 0958 GMT [Dow Jones] Morgan Stanley cuts Berkeley Group (BKG.LN) target to 990p from 1000p. Says with prospects of a double-dip in the UK housing market looking unlikely, better value can be found elsewhere in the sector. Prefers Taylor Wimpey (TW.LN) and Barratt Developments (BDEV.LN), both rated at overweight. The price target is also taken down by Morgan Stanley's reduction in target NAV multiple to 1.4x from 1.5x. Meanwhile, says Berkeley's management reassures on the company's prospects but subdued mortgage lending and amendments to the planning system continue to weigh on the sector as a whole. Keeps at equalweight. Shares -0.3% at 834.5p. ([email protected]) 0853 GMT [Dow Jones] Societe Generale downgrades Kingfisher (KGF.LN) to hold from buy and target to 228p from 310p. Says the company's 2Q sales update is disappointing with B&Q like-for-like sales 4.4% lower, compared to 2.8% lower in 1Q. Notes that once again France is proving to be robust. Says overall group sales are flat in '10, after two soft quarters. Says, "given the challenging consumer background in some key markets there is little prospect of a return to top line growth in the near term." Shares +0.3% at 225.9p. ([email protected]) 0828 GMT [Dow Jones] Credit Suisse nudges up Soco International (SIA.LN) target to 419p from 417p. Says the company is entering the most significant period in its recent history, as Soco undertakes its largest exploration program, in terms of potential resource. Maintains underperform rating, based on uncertainty surrounding the first two wells in Vietnam and the Democratic Republic of Congo. Shares -0.3% at 420.0p ([email protected]) 0700 GMT [Dow Jones] UBS initiates Chemring (CHG.LN) at buy with a 3600p target. Reckons the group will continue to grow earnings at circa 20% per annum over the next two years. Adds the company's current valuation reflects concerns over the outlook for defense spending and potential margin pressures. "We believe management recognizes this long-term threat, and is positioning Chemring accordingly by looking to diversify into areas where defense spending is expected to continue growing, and investing in new facilities and products that are less dependent on current levels of conflict," adds UBS. Shares closed at 2959p Thursday. ([email protected]) 0653 GMT [Dow Jones] UBS downgrades Standard Chartered (STAN.LN) to neutral from buy. Says at 11.5x 12-month forward earnings, Standard Chartered is still at a 15% discount to historical averages, but its price/tangible net-asset-value of 2.7x is now modestly above. "On balance, we see the shares up with events," it adds. Expects a healthy set of 2010 interim results, due Aug. 4. "The 1H balance in income should continue to move back towards Consumer; and within Wholesale to the customer business. Impairments are set to have improved across the board," it adds. Keeps target price unchanged at 1850p. Shares closed at 1842p. ([email protected]) 0652 GMT [Dow Jones] Beazley's (BEZ.LN) interim results are strong says KBC Peel Hunt with EPS of $0.18 well ahead of the brokerage's and consensus expectations. Says total pretax profit of $115.5M is boosted by an excellent reserving performance. Says the group's Chilean and Deepwater Horizon losses remain unchanged. KBC's forecasts remain unchanged. Says the shares now trade at a 1% premium to '10 net tangible assets of 121p and yield 6.3%. Keeps at buy with 161p price target. Shares closed on Thursday at 122p. ([email protected]) 0646 GMT [Dow Jones] JPMorgan Cazenove lowers Logica (LOG.LN) to underweight from neutral. Says this comes in the face of possible reductions in public sector spending (32% of group revenues and 62% of UK revenues), "as well as the company's potentially insufficient offshore resources to make them price competitive in commercial outsourcing bids." Brokerage adds that: "We are concerned that the company may reduce guidance at its 1H results on August 6." Has a 95p target price. Shares closed at 106p. ([email protected]) 0636 GMT [Dow Jones] JPMorgan Cazenove upgrades Aegis Group (AGS.LN) to overweight from neutral, and raises its target price to 148p from 137p. Says the company offers investors a unique opportunity to participate in an advertising agency restructuring story. "We also see limited risk of kitchen-sinking by the new CEO who is an internal promotion after the restructuring achieved by the current chairman," adds JPMorgan. Shares closed at 114p. ([email protected]) 0635 GMT [Dow Jones] Morgan Stanley raises United Utilities Group (UU.LN) to overweight from equalweight, and boosts its target price to 595p from 570p. Keeps fellow water company Severn Trent (SVT.LN) at overweight, noting it regards having both companies at overweight as the best way to play the theme of low risk equity regulatory asset base [RAB] growth and robust dividends driving attractive total returns in uncertain times. "We see the best total returns for these names (12% per annum for United Utilities and 13% per annum for Severn Trent on average for the 2010-15 new regulatory period) coupled with low relative valuations," it adds. United Utilities shares closed at 564p, while Severn Trent shares closed at 1276p. ([email protected]) 0627 GMT [Dow Jones] Vodafone Group's (VOD.LN) results are better than expected, the group returning to organic growth, says Mandeep Singh at Berenberg Bank's specialist sales, telecoms team. Says data revenue growth is accelerating, free cashflow is very strong in the quarter and full-year guidance is re-affirmed. Notes though that India and Turkey largely drive the beat in revenue, while Europe is in line overall. Expects the shares to start slightly higher, but thinks a better result in Europe would have driven a stronger share price move. Has a buy view with 170p price target. Shares closed Thursday at 149p. ([email protected]) 0626 GMT [Dow Jones] Morgan Stanley raises Millennium & Copthorne (MLC.LN) to equalweight from underweight and target to 480p from 440p. Brokerage makes the call ahead of the company's 2Q results due August 5, as it believes recent weaker share price performance fails to reflect that trading in key cities continues to improve, currencies are moving in its favor, and the proposed disposal of the Singapore shopping centre suggests that its attitude to low-return assets is changing. "We increase forecasts by circa 10% and while momentum is good, a low-return business that is relatively fully valued keeps us at equalweight," it adds. Shares closed at 468p Thursday. ([email protected]) 0622 GMT [Dow Jones] Liberum Capital cuts Kingfisher (KGF.LN) to neutral from buy and its target price to 240p from 275p. The broker said it fears that the company's UK project spend will continue to weaken over the next 12 months and that this could be reflected in other markets. "We see evidence of this in our consumer survey data on home improvements, willingness to move and UK planning applications," it said. Shares closed Thursday at 225p. ([email protected]) Contact us in London. +44-20-7842-9288 [email protected] (END) Dow Jones Newswires July 23, 2010 05:58 ET (09:58 GMT)