Broker tips: Centrica, Amlin, House-builders

21st Nov 2011 12:56

Investec has reiterated its buy rating on British Gas owner Centrica after the energy giant's announcement of "major moves in the gas market"."We believe that these are good moves that will underpin Centrica's position on both the Upstream and Downstream side," said Investec analyst Angelos Anastasiou."Confidence still needs to be regained in the UK supply market for full confidence in the shares to be achieved. However we believe that the share price is now factoring in unreasonably pessimistic scenarios on the supply side, and that Centrica is underpinned by strong cashflow, good EPS [earnings per share] and DPS [dividend per share] growth, and undemanding multiples."The broker's 425p target price is put under review.Both UBS and Credit Suisse have cut their target prices for FTSE 250 insurance firm Amlin following the group's third quarter update last week.UBS notes that Amlin raised the estimated loss from the Japanese earthquake to $206m from $156m, while the loss from New Zealand rose by 11% to $338m. UBS cuts its target price from 290p to 282p.Credit Suisse analyst Alex Orioff said "Underwriting profitability appears to be under further pressure from the first half losses and third quarter events, already running above second half nat-cat [natural catastrophe] budget, before Thai floods." The broker cuts its target price from 457p to 429p.Both brokers maintain their neutral ratings on the stock.Analysts at Credit Suisse are quite positive on the ability of UK house-builders to tap their holdings of land to generate cash if necessary.For that reason they have decided to raise their price targets on several of those companies, while maintaining their positive view on the sector. By their estimates, "Under a scenario where the industry operated for cash in 2012, along the lines of our Liquidation Value analysis, for one year only before returning to the medium term strategy we think the industry could generate £2.3bn of cash, equal to 35% of the current industry market cap. We think the average land bank length of 5.3x could be reduced by one year without making any material negative impact on the business model," they point out. Credit Suisse has thus raised its target price on Bellway to 850p (from 768), on Persimmon to 572p (form 571) and on Taylor Wimpey to 46p (from 41). AB