Broker snap: Credit Suisse highlights challenging end markets for Michael Page

29th May 2013 10:44

Credit Suisse said it remains cautious over recruitment firm Michael Page International (MPI) and has kept a 'underperform' rating for the stock due to its challenging end markets.In its global labour survey, World at Work, Credit Suisse has analysed employment data from 11 major economies and found a "lack of direction" and mixed conditions overall. In the UK, the outlook remains "reasonably positive" with vacancy data showing growth and positive momentum. Above-average hours worked and optimistic hiring intentions have also helped the outlook. Meanwhile, Spain is seeing some progress, albeit in an "extremely difficult" market. However, Credit Suisse highlighted the broader weakness in Europe which has shown no signs of improvement. US markets have yet to gain a clear direction with recent economic data coming in mixed, while trends in Australia and China have weakened."We remain cautious on the generalist staffers as lead indicators in the US moderate and key markets in Europe remain under pressure making it more challenging for the firms to reach margin targets," the broker said."Weak vacancy data across continental Europe and Australia will see further pressure on permanent recruitment markets in H1 2013, in our view. While this will be partially mitigated by better conditions in the UK, we expect that the professional staffing agencies will see further declines in their perm recruitment operations."The broker said that MPI, which a 77% exposure to the permanent markets and a 40% exposure to Europe, "has both the most challenging end markets and the most optimism reflected in the share price".Credit Suisse's preferred stocks in the business services sector are "quality-growth companies" such as Capita and Experian (both rated 'outperform'), which are benefitting from improvement employment markets in the UK as well as growth in the US.Hays (rated 'neutral') will be helped by improvements in the UK but it is also exposed to weakness in Germany and Australia, the broker said.