Broker tips: Experian, Atkins, Hasgrove

15th Apr 2010 12:46

The improvement in the fourth quarter organic growth rate at credit checker Experian 'bodes well for the new financial year' but Charles Stanley says it is probably still too early to uncork the champagne.The broker notes that 'there was a large swing in the performance of Decision Analytics which showed flat Q4 [fourth quarter] compared to a 9% decline in Q3,' while 'Interactive was better largely due to easier comparatives,' but the key Credit Services division saw organic revenue down 5% year on year.The broker is looking for growth to resume in the Credit Services division early in the new financial year.'Although the share price has revived over the last year, we see further potential as organic growth returns to more normal levels of growth in 2011,' Charles Stanley said, adding that its 'buy' recommendation remains unchanged.Engineering contractor WS Atkins put in an impressive performance in the year to end-March but worries over the group's exposure to the UK public sector remain a drag on the shares."Share price catalysts on the positive side are redeploying some of the group's cash (acquisitions to reduce the group's UK public sector exposure - c60% revenues - or a special dividend) and that public sector spend cut concerns do not have as great an impact as feared," Numis Securities observes."Catalysts on the negative side include not making the sizeable acquisition/investments to diversify (the chief executive has a negligible acquisition history [i.e. done small occasional bolt-ons] and is particular to culture and price) and the scale of public sector spending cuts & pricing pressure on the group's UK Public sector revenues," the broker goes on to say.The broker rates the shares a 'hold' and has a target price of 689p, but believes the company's high dividend yield is needed to support the share price at present to compensate for growth risks."The next news is the June 17th finals, but with an election in between time and increasingly bold statements on public spend cuts being made, investors may be tempted to top slice their shares," Numis advises. Marketing group Hasgrove appears to have recovered from the problems that prompted a profit warning back in November, judging by the confident outlook for 2010.Thursday's trading update has prompted KBC Peel Hunt to upgrade the shares from 'hold' to 'buy'. "In hitting numbers and providing a reassuring commentary the company has demonstrated that the issues that gave rise to the warning in November are both understood and controlled," KBC analyst Malcolm Morgan writes."Big contracts in any small group will always pose a risk, and that remains true with Hasgrove. However, we believe this risk is well reflected in a target rating of 7x current year earnings which suggests a target price of 85p," the broker concluded.