Broker tips: Amec, RSA, Anglo American

18th Feb 2013 12:43

Canadian brokerage firm Canaccord Genuity is forecasting 'weak growth' for AMEC, the FTSE 100-listed engineering consultancy firm which published its full year results last Thursday.For that reason it downgraded its profit forecasts for 2013 by 4% and by 2.5% for 2014 following the company's results and presentation.James Evans, a broker at Canaccord Genuity, has also given AMEC shares a "hold" rating with a target price of 1,215p.Describing his view of AMEC's growth prospects for the year, he said: "AMEC's growth in 2013 is likely to be weak and we forecast just 3% [profit growth] on an underlying basis this year, with Mining and Oil sands material headwinds.Despite all of the above he believes that last week's falls were overdone. Analysts at Panmure Gordon have on Monday morning issued a research note telling clients to 'hold' on to shares of non-life insurer RSA. In their view the company's valuation is fully up to speed, given the improving but still challenging trading conditions.In greater detail, they explain how the shares' upside is likely to be restricted by their current valuation metrics, which are now at a relatively high price/net tangible asset value ratio of 2.1 times and a price-to-earnings multiple of 10.8. The downside, on the other hand, ought to be limited given the firm's 7.1% dividend yield.Nevertheless, they have raised their price target on the shares to 130p from 110p before. Credit Suisse wrote today to clients telling them he expects Anglo American's net debt to climb, providing limited options for growth for incoming Chief Executive Officer Mark Cutifani.The broker explained that the group's levels of capital expenditure (capex) are still increasing and are now greater following raised capex guidance from management, while free cash flow is negative despite operational improvement across the mining company and an improved earnings forecast for this year. Hence the increase in debt levels and the limited scope for new projects. The company raised its guidance on capex for 2013/2014 to between $7.5-8bn and $6.5-7bn, whereas the broker had previously modelled $6bn and less than $5bn, respectively."Without a more fundamental shake up of the business shape (e.g. stake sales, mergers and acquisitions), in our view the value case for Anglo American remains elusive and long dated," Credit Suisse stated as it reiterated its 'neutral' rating and £21 target price.AB