Broker tips: Barclays, Yell, HMV

30th Jun 2009 12:26

Following hot on the heels of Goldman Sachs's broadly optimistic review of the UK banking sector yesterday, Deutsche Bank has cast a favourable eye on British banking giant Barclays.Deutsche sees further opportunity for share price growth driven by earnings."We expect adjusted earnings of 27p in 2009, rising to 39p in 2010, 49p in 2011 and 72p in 2012 as net interest margins, loan impairments and risk asset drags recede. The stock is inexpensive on this basis, in our view," Deutsche believes. The bank has upped its price target for Barclays from 220p to 365p."We expect the equity market will increasingly look at Barclays' underlying earnings power - excluding risk inventory charges - now that capital adequacy is less an issue. On this measure, the stock is even cheaper on around 5 times earnings despite loan losses befitting a serious recession and margin loss which goes with near-zero official rates," Deutsche concludes.Panmure Gordon has its rating for Yell Group under review after the Yellow Pages publisher said it has started talks with its banks over a comprehensive refinancing.Panmure Gordon reckons the key point in the refinancing talks will be the revised interest rate, which will apply from 2011 onwards; the blended interest rate on Yell's current debt is 8%.The broker reckons the stock is highly speculative, with the equity valued at almost zero and a conventional rights issue more or less out of the question. "More certainty over debt costs is a clear positive, so at least an end is now in sight," the broker concludes.HMV has released full-year results marginally ahead of KBC Peel Hunt's expectations and not surprisingly the broker has left its buy recommendation unchanged, especially in view of the stock's juicy dividend yield."The final DPS of 5.6p has been held, keeping the full year DPS unchanged at 7.4p, representing a yield of 6.4%, one of the sector's highest, backed by a largely debt-neutral balance sheet," KBC analyst John Stevenson said.Charles Stanley has just initiated coverage of the stock with a "buy" recommendation and a target price of 160p."For our PT [price target] to be achieved, we believe that HMV needs to continue to demonstrate that it is outperforming the trends in its key products markets. This could in part arise from further capacity withdrawal i.e. competitor downsizing or completely exiting HMV's markets," said Charles Stanley analyst Peter Smedley.