Broker tips: Cobham, Marston's, SIG

7th Apr 2010 12:50

Goldman Sachs is well aware that defence stocks will be vulnerable to spending cuts in coming years, but thinks that Cobham's focus on electronics will largely insulate it from this and raises its target price on the stock to 270p from 210p."We believe large defence contractors are very vulnerable to cutbacks on new platforms," he said."However, the electronics content of defence platforms tends to increase over time, and electronics can also be retrofitted to old platforms."Goldman, which has a 'neutral' stance on Cobham, thinks that the promotion of former chief operating officer Andy Stevens to chief executive on January 1 involves 'transition risk but also upside risk.'KBC Peel Hunt is holding off changing its earnings forecasts for brewing and pubs group Marston's ahead of the general election, but has hinted that upgrades could be on the way following Marston's trading update on Wednesday morning."Further progress on the new build programme, and consistent underlying trading, lay the base for next year's 11% forecast earnings growth, which compliments the 6% yield," KBC analyst Paul Hickman said.The broker has a 'buy' recommendation on the shares with a price target of 120p.Goldman Sachs has retained its 'buy' recommendation but downgraded its earnings estimates for SIG after the construction products provider's recent results, which were in line with expectations.The company got off to a slow start to 2010, partly as a result of adverse weather conditions in the UK and continental Europe, and that has prompted Goldman Sachs to modify its sales and profit projections. "We now forecast 2010 and 2011 revenue growth of -2% and +8% (from +5% and +8%). As a result, we reduce our 2010 and 2011 underlying PBT [profit before tax] to £67m and £103m (from £95m and £140m),' Goldman Sachs analyst Karen Hooi said.The broker remains a buyer of the stock, despite the low visibility on the timing and size of a recovery in the construction sector, on the basis that "SIG is a survivor within the industry since it occupies a niche position as a specialist distributor."Hooi believes continued operating cost and gross margin control is vital to SIG's profit recovery. "We also believe SIG's financial position remains relatively solid and expect the company to remain within its debt covenants," Hooi said. The company's six month price target remains unchanged at 160p.