Broker tips: ENRC, FirstGroup, Electrocomponents

30th Mar 2012 11:16

Nomura has slashed its forecasts for Eurasian Natural Resources Corp (ENRC) and says that the stock to undeservedly trading at a premium to its peers.The broker claims that ENRC's international expansion strategy has faced "significant challenges" over the last two years, even though it has spend nearly $4bn on acquisitions outside Kazakhstan since 2008."These headwinds have been exacerbated by the recent delays at the BMSA iron ore project in Brazil and the lack of progress around the licences for the Kolwezi and Frontier copper projects in the DRC. These challenges leave ENRC's organic growth platform with higher risks than those of its diversified peers," Nomura said.The target price is cut from 750p to 700p and near-term earnings estimates are reduced by around 20% to reflect further operating expenditure inflation at ENRC's Kazakhstan operations and project delays. A reduce recommendation is maintained.UBS has maintained its relatively cautious view on transport firm FirstGroup, after a gloomy pre-close trading update yesterday, which saw the stock tank.The broker is unsure about the company's plan to return margins to 10% in both UK Bus and US School Bus in the next couple of years. UBS hadn't forecasted this to happen until 2015 and said there is "little visibility as to the improvement, given FGP's mixed track record."The target price is cut from 305p to 250p and the broker has maintained its neutral recommendation for the stock.Peel Hunt has raised its target price for electrical components distributor Electrocomponents but maintained its sell rating on the stock, saying that the uncertain outlook does not warrant the current valuation."We are raising our price target to 225p [from 180p] on the basis that, whilst the outlook is uncertain it has not deteriorated significantly since H2 last year. Also, the market has re-rated materially since then," said analyst Henry Carver.The 225p target equates to the stock trading at 12 times next year's (ending 2013) earnings. Currently, the shares are trading at a multiple of 13.5, the broker said. Carver believes that the current price "is assuming a stronger performance in Europe than the current outlook suggests".BC