Broker tips: CPP, De La Rue, Mitchell & Butlers

20th May 2011 12:28

UBS says that current trading is "ok" at CPP, but with slowing sales and no further clarity on the situation with the Financial Services Association (FSA), the broker cuts its forecasts."We have reduced estimates by 8% for 2011, increasing to 16% by 2013 reflecting lower revenue growth in UK and Spain, plus lower margins," said analyst Alex Hugh, who notes that the forecasts have higher risk until the outcome of the FSA investigation (into "sales-related issues" with IDP) is revealed.The target price is slashed by 30% to 125p, from 160p, while a 'neutral' rating is kept.Numis has upgraded banknotes and passports printer De La Rue to 'add', from 'hold', on potential bid activity and anticipation of some earnings recovery.The broker says that if the group can deliver mid-cycle earnings of £100m/72p per share (Numis estimate) in a "visible time frame" (e.g. year ending March 2014), then - with the right prospects further out - it could justify a 1,000-1,300 share price over the next few years (up from the current share price of around 845p on Friday).Furthermore, recent press comment concerning potential bidder Oberthur suggest that it may potentially have €1bn of extra cash after selling 60% of its smart card business."This would enable it to credibly return to the bid table from July 25th," said analyst Francesca Raleigh. A target price of 950p is retained for De La Rue.Due to cost pressures at Mitchells & Butlers, Nomura reduces its "ahead-of-consensus" 2012 earnings estimates, however the 'buy' rating and target price of 435p are kept in place.The pub chain reported earnings before interest and tax (EBIT) of £141m in the first half, £5m of which was from sites now disposed. As a result, the remaining £136m for the retained estate was flat year-on-year, and with a pre-tax profit of £63m, the figures were in line with the Japanese broker's forecasts.However, increased assumed energy costs (including carbon tax) and food costs have prompted the broker reduces 2012 EBIT by £9m (3%) from £329m to £320m. 2011 forecasts are unchanged.---BC