Broker tips: BTG, Halfords, National Grid

19th Nov 2010 13:50

KBC is impressed with BTG's latest acquisition, as it foresees some exposure in emerging markets for the UK drugs group. The acquisition of stent specialist Biocompatibles (BII) is expected to bring in a £36m revenue stream, a significant cash position of £33m and an underlying profitable business (BII reported a £1.2m net profit at interims). Cuddon says that the potential synergies, increased critical mass in the US and the diabetes program partnered with AstraZeneca is likely to see its valuation rise to outperform "our blue sky target of 600p on a three-year view". For now, the broker recommends 'buy' with a target price of 312p.Despite Halfords suffering a series of setbacks in recent months, finnCap remains a 'buyer' of the car and bike parts retailer for its above average yield. The company's interim results were generally in line with expectations, with pre-tax profit coming in only £0.7m higher at £86.7m.However, like-for-like sales during the first six weeks of the second half were 5% lower than finnCap was modelling. Therefore, the broker's forecasted pre-tax profit for the financial year has declined to £129.1m from £133m and its target price, based on a PE ratio of 12, has been cut from 545p to 525p. Despite the downgrades, finnCap says 'buy'. Despite generous valuations, Nomura downgrades National Grid (NG) to 'neutral' as the broker fails to see any upside potential to the current share price. The broker has revised its target price to 570p from 525p, still less than the current share price of 575p. NG's recent "outperformance" - which has seen shares rise 16% (13% versus the sector) since 1 June - has been helped by the "rally in long-term government debt, given the yield proxy nature of NG and the implied lower real weighted-average cost of capital" says analyst John Musk. "We suggest that recent weakening in treasuries may make it harder for this outperformance to continue", Musk added.