Broker tips: Diageo, Game, Micro Focus

8th Dec 2010 13:57

The recovery in the global spirits market looks like it's still "on track", keeping Nomura positive on big players Diageo and Pernod.Japanese broker Nomura repeats its 'buy' rating on the pair and sees trading news improving for both over the next few quarters.Look out for Diageo North America's update call on 14 December. Game Group's poor interims have prompted broker finnCap to trim its forecasts, as the prospects for the company "in today's high street are not good".The statement released today showed that group sales were down 7.8% in the 18 weeks to 4 December, with the UK and Ireland market seeing an 11.1% decline in total sales, broadly in line with the broker's expectations.With the peak trading period on its way, the broker notes that forecasts of poor weather give cause for concern. Estimated pre-tax profit and earnings per share for 2011 have been trimmed by 3.1% and 4.4% respectively.The broker sticks with its 50p target price - based on a price-to-earnings ratio of 9 - and retains its 'sell' stance on the stock.Panmure Gordon has increased its target price for Micro Focus International to 467p from 460p after interims matched guidance.Analyst George O'Connor notes that cash generated from continuing operations stood at $77.9m at 31 October from $25.6m last year, bringing net debt down to $40.4m from $104.1m."Shares are very attractively priced," says O'Connor, as they trade on a price-to-earnings ratio of 10.2 and an enterprise value-to-sales ratio of 2.7.The broker retains its 'buy' recommendation.