Broker tips: Capita, Prudential, Ladbrokes

12th Aug 2013 11:19

Capita was under selling pressure on Monday morning after Citigroup cut its rating for the outsourcing group from 'buy' to 'neutral' on valuation grounds."Capita has returned to 10-15% PE premium to the sector. While this is below its 20-30% decade-average premium, this seems justified in our view by lower than decade-average organic growth and margin progression prospects."Nomura has reiterated its 'buy' rating and 1,392p target price for Prudential after the insurer's forecast-beating first-half results on Monday morning, saying that it remains the top pick in the sector.The broker said that Prudential has a "superior growth profile" compared with its large-cap insurance peers on all metrics, "which, importantly, is not at the expense of dividend growth". JPMorgan Cazenove has cut its recommendation for High Street bookmaker Ladbrokes from 'neutral' to 'underweight', highlighting weakness in UK Retail and risks to short-term consensus estimates.While the stock (at 12.2 times 2014 earnings) is trading at a discount to William Hill (13.5x) and the wider gaming sector (15x), JPMorgan said this "does not fully reflect the risks associated with LAD's turnaround".BC