Broker tips: AB Foods, Hammerson, Logica

23rd Feb 2011 12:39

Nomura keeps its positive stance on Associated British Foods, saying that near-term cost pressures at its Primark division now appear discounted, and the business is well-placed to expand over the medium term.The broker highlights the near-term downgrade risk at AB Foods' Primark division - with raw cotton costs rising - and cuts the group's 2012 earnings before interest and tax estimate by 4% to reflect this.However, with the Primark and British Sugar owner trading 11% down in the year-to-date, "this now looks more than discounted," says analyst Alex Smith."Looking further out, we believe Primark remains an underappreciated growth story, with potential to double to treble in size over the next 5-10 years," adds Smith.With trading expected to be 'in line' with profit growth ahead of last year, the Japanese broker confirms a 'buy' and target price of 1,035p.UBS says that retail real estate group Hammerson is too defensive relative to its peers, and despite results beating expectations, the broker remains cautious.After 2010 earnings per share (EPS) came in 2% above the broker's estimate, it raises the EPS forecast for the current year by 3% to 19p.UBS notes that while Hammerson is well placed to benefit from a UK/French retail recovery with a solid property and financial base, it has a lower exposure to Central London (11%), a lower earnings yield and gearing, relative to its sector peers."Given its size this could change relatively quickly, but we prefer to reserve judgement until we see which route for growth the group takes."The target price is raised from 450p to 480p to reflect above-estimate earnings, but the 'neutral' rating is kept in place.Singer Capital Markets remains a buyer of Logica shares after the software group reported solid results and a positive revenue guidance for 2011.2010 results were in line with expectations, reflecting improvement in the second half, with particularly strong performances in territories like France and the Nordics."A healthy pipeline in Consulting and Professional Services, as well as significant Outsourcing orders in the first quarter of 2011 coupled with the 2010 Outsourcing book to bill of 110%, have contributed to a good order backlog," says the broker.Additionally, Logica announced that it expects revenue in 2011 to grow faster than the market, with a modest operating margin improvement.Singer stays positive with a 163p target price.