Broker snap: Fears of WPP equity issue overdone

20th Aug 2009 12:57

Nomura Securities has reiterated its 'buy' recommendation on WPP ahead of the advertising giant's interim results next week.The Japanese brokerage notes that WPP shares have just about outperformed the Dow Jones STOXX 600 index of European companies recently but has lagged advertising peers such as Havas, Publicis and Aegis. Nomura believes this is because of worries about WPP's balance sheet but recent bond issues should have alleviated short-term refinancing pressures 'making an equity issue very unlikely in our opinion.''If, as we expect, WPP can demonstrate that the balance sheet is secure, and that organic revenue growth and margin performance is broadly in line with peers in the first half, there remains considerable scope for the rating discount to close,' said Nomura analyst Colin Tennant.