Broker tips: Balfour Beatty, De La Rue, TSB

26th Sep 2014 13:13

Deutsche Bank has recommended buying shares in Balfour Beatty, saying the group presents an "attractive" opportunity.The analyst said the firm's planned disposal of Parsons Brinkerhoff will improve the company's balance sheet following profit warnings in the construction division."After several profit warnings in the construction division, two CEOs (currently has no CEO) and a failed approach by Carillion, the shares have been one of the weakest performers in the sector, down 24% year-to-date)," Deutsche said."The announced sale of Parsons Brinkerhoff addresses both the balance sheet concerns and together with the stable public private partnership-assets portfolio anchors the valuation. This combined with the overly negative market sentiment provides an opportunity."However, the broker warned of downside risks in construction and worsening payment terms.Deutsche upgraded its rating from 'hold' to 'buy' and raised its target price to 270p from 245p.In a note issued on Friday, Investec Securities said it had lowered its earnings before tax, interest, and amortisation (EBITA) forecast for the banknote printer De La Rue to £64.1m for the 2015 fiscal financial year.Investec had originally forecasted EBITA to be £88.2m but in the wake of the profit warning issued by the firm on Friday, the third in three years, Investec announced it had lowered its forecast below guidance level, which currently stands a £69m.The analyst firm also reduced its earnings per share forecast for the 2015 and 2016 financial years by 35% and 43% respectively, while EBITA forecasts for the next two financial years have been downgraded by £24.1m and £33.5m.Investec said it expected the stock to fall heavily on Friday, especially given the signalled cut to the dividend and that it had reduced its target price on De La Rue shares to 600p, still higher than Numis' target price of 540p.De La Rue shares plummeted on Friday and had lost 27.55% to 549.87p at 09:37.Investec Securities is feeling very positive about TSB's long-term outlook in the wake of Lloyds' decision to sell another 11.5% of its shares in the bank, it revealed in a note to investors on Friday.Having sold 38.5% of TSB in June at 260p a share, Lloyds has placed a further £57.5m stake up for sale, meaning the banking giant will be left with a 50% share in the group. It remains obligated to exit in full by the end of 2015.Investec said that while TSB had "sharply underperformed" against all other UK domestic banks over the past six weeks, the new share sale boosted the group's long-term prospective, though it remained "slow-burn" in the short-term future.The broker added that it estimates TSB will report a loss in the second half of 2014 and in the full-year 2015, albeit one that would be "more than offset by the temporary mortgage enhancement subsidy".It said it expected the bank to become a low-risk legacy-free investment with a sustainable ratio between return of equity and the cost of equity after 2019 and beyond.Investec reiterated its 'hold' recommendation for the stock, with a target price of 290p.TSB shares were down 0.77% to 277.85p.