Broker snap: Homeserve sale gets thumbs-up

19th May 2009 12:42

The decision by home emergency insurance cover specialist Homeserve to get shot of its UK Emergency Services division has been welcomed by analysts at Panmure Gordon and Royal Bank of Scotland.Panmure Gordon analyst Andy Brown reckons the decision to exit the UK emergency services area will remove 'a key uncertainty behind the share price,' a view echoed by Jane Sparrow at Royal Bank of Scotland (RBS), who says the move 'simplifies the group going forward.'Against this, Sparrow notes that the company has spent a lot of money building this business and it will probably only receive a fraction of its investment back when it sells it,RBS, which has a 'hold' recommendation for the shares, said Homeserve's interim results revealed a performance that was slightly more resilient than expected, though the boost was 'largely delivered by cross-selling with no change in the overall customer numbers versus the previous year.''While 2009 was about cross-selling, the focus for 2010 is on getting new customers and we remain slightly cautious on how easy this will be in an environment of rising unemployment with the low hanging fruit already gone,' Sparrow said.Panmure's Andy Brown sounds more optimistic over Homeserve's prospects. 'We believe the UK plumbing business is not yet mature and there is upside potential from international growth, especially in the US. The company has low cyclicality, good visibility and high margins, and it is cash generative,' Brown said.The broker recently lifted its target price for Homeserve to 1300p.