Broker tips: Burberry, Weir Group, Aggreko

15th Oct 2009 12:00

Luxury fashion group Burberry has enjoyed an excellent run since joining the ranks of the FTSE 100 and its good fortune continues today after JP Morgan raised its target price on the group.After yesterday's well-received trading update, in which Burberry reported a better-than-expected 5% rise in second quarter sales thanks to a good performance in Europe and Asia, the broker has lifted its target price on the group to 540p from 480p.JPM says its new view of Burberry reflects better like-for-like sales and higher margins.Broker Panmure Gordon has been casting its eye over some positive developments in the global economy and concludes that Weir Group, which supplies engineering services to the mining and oil & gas industries, ought to be one of the beneficiaries.Among the positive signs have been yesterday's announcement by mining giant Rio Tinto, whose quarterly metal production figures suggest the downturn may be coming to an end. 'It appears that the mining industry has moved ahead now with increased optimism,' said Panmure.Panmure thinks the mining bounce is being powered by a general economic revival, but also by weakness in the dollar, which has sent investors looking for safety in the commodities sector. The broker is aware of expectations of a revenue dip for Weir in 2010, but chooses to look ahead to 2011, since many orders made in 2010 will appear in the following year's figures.The target price is increased from 690p to 880p and the recommendation is raised from 'hold' to 'buy'.Aggreko raced ahead today after it raised guidance for the year, convincing Charles Stanley to upgrade its pre-tax forecast for 2009 by 10%.The broker thinks the temporary power supplier will make an annual profit of £236m, up from the £215m forecast previously, but leaves its 2010 estimate unchanged at £190m.Revenues in the three months to 30 September were 8% lower than in 2008 at constant currency, said Aggreko, and were down 16% excluding pass-through fuel. Its International Power Projects business beefed up revenue by about 10%. "The market remains very attracted to Aggreko, but at 15.2x our forecast for next year, the price is high enough," said analysts at Charles Stanley."Next year's figures are likely to be lower, but we don't expect to see many sellers whilst the possibility of further upgrades remains," They maintain their 'hold' recommendation.