Broker tips: BSkyB, Rank, Spectris

18th Jul 2011 12:53

UBS has upgraded satellite broadcaster British Sky Broadcasting (BSkyB) from neutral to buy and lifted its target price by over a third, saying that the risk reward is attractive."BSkyB (Sky) is the leading player in UK pay-TV and we expect it to deliver 6.0% [per annum (pa)] revenue growth over the next three years driven by rising pay-TV penetration (2.1% pa subscriber growth) and take-up of new services driving [average revenue per user] (3.9% pa). With a relatively fixed cost base, this results in 14.9% pa [earnings per share] growth," the Swiss broker said.Also, with US media conglomerate News Corp having abandoned its bid for the company, UBS thinks that shareholders will now look towards cash returns. The broker thinks BSkyB could make £2.4bn (137p per share) in one-off returns over the next 12 months.The target price is hiked from 640p to 860p.Panmure Gordon has reinstated its buy recommendation on bingo hall and casino operator Rank Group, saying that Rank remains "a compelling investment proposition".The group announced on Monday that Guoco's offer closed on Friday with 74.5% acceptances (including Guoco's own shareholding) for its 150p-a-share offer. Rank is therefore retain its listing in London, with the 75% threshold narrowly avoided."We reduce our price target from 204p to 184p to reflect a discount for the reduced free float (c25% from c60%) and weakened corporate governance, with Ian Burke now combined Chairman and CEO," they said.Credit Suisse has upped its target price for precision instruments and controls group Spectris from 1,690p to 1,900p and reiterated its outperform rating, saying that the earnings momentum at the group has continued.After the firm's first half trading statement on Friday, the broker has increased its full year profit and earnings estimates for 2011 and 2012 by 3-4%."This increase [in target price] is underpinned by a change in valuation methodology to discounted cash flow vs. multiples previously with the former better capturing the potential for continued robust organic revenue growth and [earnings before interest, tax and amortisation] margin expansion both to a new peak level and a higher through cycle average," the broker said.BC