Broker tips: Diageo, Interserve, ENRC

7th Feb 2011 12:56

Nomura likes Diageo's willingness to get involved in spirits mergers and acquisitions (M&A) following its recent Vietnamese purchase, and highlights more deals that would likely add value to the drinks giant.On 26 January, Diageo - the company behind Guinness and a host of spirits brands - acquired nearly a quarter of spirits company Halico for about £33m, whose main brand is Vodka Hanoi. Now, the Japanese broker says that the group would be interested potentially in three Fortune brands - Jim Beam bourbon, Sauza tequila and Makers Mark bourbon."We see improving trading trends in North America, as well as continuing strong momentum in international markets. Given the M&A opportunities, we do not expect the company to restart its buyback," says analyst Ian Shackleton.The broker confirms a 'buy' rating and 1,550p target price.Charles Stanley Securities has upped its target price for support services and construction group Interserve as it believes the outlook is more promising that the consensus view.The broker's target price is 350p, from 270p, now that "concerns over growth, margins, net debt, liquidity in the Middle East and the dividend are all receding," says analyst Andy Smith."Support Services and Equipment Services are expected to report improving margins in 2011 as they show 'marked improvement' and 'encouraging signs of a pick-up' respectively. This we believe will offset the expected decline in Project Services which traded 'above trend' in 2010," says Smith.With the final dividend looking safe, and cash flow remaining strong, the broker keeps its 'buy' rating. As Eurasian Natural Resources Corp (ENRC) waves goodbye to its boss, Credit Suisse says that while the timing of the departure isn't ideal, its bullish view on the stock is unchanged.On Friday, Kazakhstan-based mining titan ENRC announced that its chief executive officer (CEO) Felix Vulis will step down from the group for personal reasons, maintaining his position until a successor is appointed."Given market concerns over corporate governance at ENRC it is unclear how the market will take this news ... The next CEO appointment could be key for sentiment toward the stock," says the broker.Vulis's departure does coincide with a number of growth projects underway, but Credit Suisse says that the underlying drivers for the stock remain firmly in place.ENRC's 'outperform' rating is kept, while the target price stays at 1,400p.