Broker tips: Compass, Autonomy, miners

5th Oct 2009 11:04

Charles Stanley has gone into more detail about its reasons for its ratings downgrade of contract caterer Compass Group last week following the company's September 29 trading update. The broker shifted from 'strong buy' to 'buy' as the stock approached the 400p price target, and still thinks the shares are cheap in comparison with those of its main competitor, Sodexho.'Confirmation of a flat revenue outcome for the year appears to indicate that Q4 [fourth quarter] organic revenue growth has stabilised and this is reassuring,' said Charles Stanley analyst Tony Shepard.'In terms of organic revenue growth, it could still be negative in Q1/2010 but we expect it to recover in H2/2010 [second half of 2010]. Overall, in 2010, we expect flat organic growth and further profit margin enhancement,' the broker concluded. Autonomy, the provider of infrastructure software for large companies, rarely likes to let a week go by without the announcement of another contract win and it got off the mark early this week with two announcements, signing up US retailer Sears as a client and revealing that Toshiba is using Autonomy technology to help power its web site.Nevertheless the shares are lower, despite Deutsche Bank raising its share price target for the firm to £16 from £10, and despite Exane BNP Paribas issuing a 'buy' recommendation ahead of the company's third quarter results.Miners feature prominently among the top performers Monday morning, helped by bullish comment from Royal Bank of Scotland (RBS).RBS has adjusted its view of many of the sector's major players after rising upwards its expectations of metals prices. The bank also foresees sovereign wealth funds turning their attention to the sector.The UK bank has turned upgraded Antofagasta from 'sell' to 'buy' while BHP Billiton, Rio Tinto and Vedanta are all moved up to 'buy' from 'hold'.'BHP has been a top pick this year and should remain one of the most over-owned stocks in the sector through year end,' a note from the bank's broking arm said.RBS reiterated its 'hold' rating for Eurasian Natural Resources but has raised its price target from 670p to 850p. Xstrata is rated a 'buy' but with a higher price target of 1200p, versus 1050p previously.