Broker tips: Admiral, Cobham, Chariot Oil and Gas

7th Mar 2012 11:24

Shares in car insurance group Admiral raced 11 percent ahead on Wednesday morning following the release of its full-year figures, with Nomura giving a lift after saying that the results give comfort on prospective forecasts.Importantly, Nomura says that the ultimate loss ratio (ULR) of 74% was in line with its forecast and slightly better than consensus. It also highlights that claims trends are appearing to stabilise. "The focus of today's results was primarily on claims experience, and we feel there have been encouraging developments in this regard. All else being equal, the slightly better than consensus ULR for 2011 should mean earnings upgrades," the broker said.Nomura has reiterated its buy recommendation and 1,100p target price following this morning's statement.Jefferies has reiterated its buy rating and 230p target price for defence technology group Cobham, saying that the firm's full-year results appear 'robust and encouraging'.Jefferies says that if worst comes to worst, Cobham's strong balance sheet and cash flows gives it scope to reduce the dividend cover or to do further share buy-backs. "We believe that Cobham will ultimately strike a balance between investing for future growth, bolt-on acquisitions and a return of capital to shareholders. We sense that sentiment towards Cobham remains quite negative, but that could change rapidly, in our view."The broker says that networks and communications are now the key growth market for Cobham, following the challenges faces in the defence industry in 2010 and 2011. "Reaching our promised land may be tough, but we believe Cobham's strong cash flows mean it can create value for shareholders," the broker added.UBS says that Chariot Oil and Gas is one of its top picks in the exploration and production sector following the 'significant' rig contract signed yesterday."This is a significant positive as it further de-risks the investment case, and we expect the shares to continue to re-rate," the broker said. UBS thinks that the well will cost around $75m and predicts that Chariot's cash at the end of 2011 (including payments from BP) was $155m. The Tapir South prospect represents over a 400% upside to Chariot's current share price in a success case assuming a farm-out to 50% working interest, the broker said.With the new rig contract de-risking the investment case, the broker now sets it price target at a 40% discount to the 608p net asset value per share, compared with a 50% discount previously. As such, the target is raised from 300p to 365p. A buy rating is maintained.BC