Broker tips: Ferrexpo, ASOS, Thorntons

20th Apr 2010 13:39

Morgan Stanley has initiated coverage of Ferrexpo with an 'overweight' recommendation for the Ukraine-based miner.The miner's London listing offers investors an opportunity to gain exposure to iron ore prices, Morgan Stanley argues, adding that vertical integration allows Ferrexpo to process all the iron ore it mines and convert all production into pellets, which in turn improves operating margins. "Ferrexpo also enjoys a landed cost and value-in-use advantage compared to international majors, due to its freight differential (proximity to Central and Eastern Europe) and the quality of its pellet product," the team at Morgan Stanley (MS) notes.The broker has a price target of 406p for the shares. "While the stock is pricing in c$55/t [$55 per tonne] normalized iron ore price (above our long-term estimate of $53.5/t), at a not unrealistic $80/t long-term iron price we estimate the share price could almost double," MS suggests.KBC Peel Hunt is maintaining its 'wait-and-see' attitude on online retailer ASOS but sees scope for revenue upgrades as sales momentum builds in the retailer's key territories."ASOS remains one of the few genuine organic retail growth stocks, with further progress to be delivered in the UK and overseas, although the latter remains the growth engine in our forecasts," KBC analyst John Stevenson said. The US, French and German web sites remain on track to open this year, the company said.With a price/earnings ratio of 23 based on projected 2011 earnings the stock rates no more than a 'hold' in KBC's view. The broker has left its price target unchanged at 500p.Singer Capital Markets is another broker that thinks the shares are fairly valued. It has a target price of 425p.Panmure Gordon is a buyer, however, even though sales growth was slightly below expectations. "Current trading is very strong vs. a strong comparable period and the outlook statement is very positive. We reiterate our buy rating and 607p price target," the broker said.Enthusiasm for Thorntons is melting away at FinnCap after the chocolates retailer's profit warning on Tuesday morning.Though the broker retains its 'hold' rating it has cut the price target for Thorntons to 115p from 136p after 'a relatively disappointing Q3 [third quarter] sales result."The Thorntons board has indicated a profit before tax result for the full year of £7.5m, in contrast to FinnCap's expectations of £8.9m. On the plus side, the broker notes that commercial sales "grew by an impressive 33.9%" in the third quarter, excluding the effect of private labels sales, while Thorntons Direct sales grew strongly, albeit from a small base."It is also the case that the group will pay a 6.8p dividend (vs 6.05p) even if the final is now only maintained so there is a 6.1% prospective yield," FinnCap analyst Charles Pick notes.