Broker tips: Compass, Daily Mail, Straight

29th Sep 2009 12:53

Despite a strong set of fourth quarter results from contract caterer Compass Group, Charles Stanley is downgrading the stock to 'buy' from 'strong buy' as the share price approaches the broker's 400p price target.After the third quarter update in July, which showed organic revenue growth in decline, 'confirmation [in the fourth quarter update] of a flat outcome for the year appears to indicate that Q4 organic revenue growth has stabilised and this should reassure investors,' the broker believes.'The share valuation looks attractive compared to its main competitor Sodexho and the wider equity market though as the share price has moved closer to our 400p price target we move the recommendation to Buy (last recommendation was Strong Buy on 15/09/09 at 354p),' the broker concludes.Singer Capital Markets believes Tuesday's results from Daily Mail & General Trust point to an improving trend in national and regional press advertising, but thinks pure consumer press plays Johnston Press and Trinity Mirror are better placed to benefit from this than the Daily Mail publisher, which is also exposed to the business to business media market.'As we expected Property has been strong in Regionals and we would expect Nationals improvement to have been supported by the Retail campaigns that are being driven by category leaders. This is a positive for Johnston Press (Buy, Target Price 47p) and Trinity Mirror (Buy, 218p),' said Singer analyst Johnathan Barrett.As for Daily Mail, Barrett said the stock trades on 12.3 times forecast earnings for 2009 and 2010, and the stock price 'looks up with events given its late cycle exposure to B2B [business to business].'Half year results from recycling box supplier Straight were ahead of expectations, according to Panmure Gordon, which has responded by increasing its target price for the stock. The broker said the interim earning per share (EPS) of 6.1p represent 65% of the broker's old full year estimate, which it has now revised upwards, albeit only by 5% to 9.9p. The new full-year earnings estimate reflects some order book caution and low level visibility for the fourth quarter. Once trading trends become clearer, there may be 'scope for raising this estimate', the broker conceded.In the meantime the broker is forecasting a full year dividend payment of 3.7p after the interim dividend was hiked by 30% to 1.3p, 'which provides a useful yield of 4.4%.''For 2010E [2010 estimates] we expect continued growth in the trade business to reflect the returns from increased tooling investments,' the broker said. 'We also expect the retail segment to grow strongly from a low base,' it added.Panmure Gordon has reiterated its 'buy' recommendation for the stock and has raised its price target from 82p to 100p.