Broker tips: BAE, Laird, KESA

12th Oct 2011 09:56

Investec has downgraded UK defence contractor BAE Systems from buy to hold, saying that while third quarter trading was in line, uncertainties have persisted as expected.The broker says that a lot of bad news is already price in, with the trading on a 6.6 times forward earnings. "But with potentially (positive and negative) price-moving events coming up we move to a neutral stance," given that the shares have moved close to its 300p target price. UBS has raised its rating for electrical components manufacturer Laird after "de-risking" its numbers."In an attempt to de-risk our numbers, we have lowered our forecasts by 3-17% for 2011/12E and now embody a 'grey-sky' cyclical decline in 2012E."Nevertheless, the broker says that the stock 's valuation - an enterprise value-to-sales ratio of 0.9 and a price-to-earnings ratio of 9.6 - is "compelling even on our lowered forecasts."The target is cut from 185p to 160p.Nomura has kept its neutral stance on electrical retailer KESA Electricals but said that the disposal of Comet is "key to unlocking value".While the disposal process of the Comet chain is ongoing, the broker highlights three key benefits of the sale. These are: "freeing up of c. €70-80m of working capital at peak required by Comet; removal of over €20m of earnings before interest and tax losses; reduction in future capex spend and management time".Nevertheless, the broker says that due to operating forecast reductions, the price target is cut from 157p to 120p.BC