Broker tips: Capita, Homeserve, Hamworthy

18th Nov 2011 11:36

Investec has reiterated its hold recommendation on business outsourcing company Capita, highlighting a "more cautious tone" to the group's interim management statement released on Friday."The group has had a reasonable year in terms of contract wins but the expected pick-up in the second half is clearly not coming through at the levels hoped for earlier in the year," said Investec analyst Robert Morton.The broker cuts its current-year earnings per share estimates and, as such, its target price from 725p to 630p.Charles Stanley has slashed its target price for Homeserve from 505p to 290p, saying that 2013 earnings and key performance indicators (KPIs) are "under threat".The stock is now down 44% since it announced that telesales and marketing activities were suspended over mis-selling issues on 31 October. The broker notes that while the fall may have been overdone, an immediate recovery is unlikely, given CPP's struggles to recuperate after concerns over mis-selling practices.Before the October revelation, the broker had kept a hold rating on the stock, due to its high valuation. While this no longer is a concern, given recent developments, "it is too soon in our view to rate Homeserve a buy. Neither is it a sell given the precipitous fall."Evolution Securities has downgraded marine, oil and gas services firm Hamworthy from add to reduce following yesterday's announcement of a possible offer for the company.Hamworthy revealed last night that it is in advanced discussion with Finnish peer Wartsila Corporation regarding an 825p-a-share cash offer, a 22% premium to yesterday's closing price of 675p. After raising its target price from 750p to 825p (to match the potential offer price), and with shares rocketing towards that level on Friday morning, the broker is forced to cut its rating.BC