Broker tips: FirstGroup, BHP Billiton, Asos

18th Jan 2010 11:44

Subdued profit growth in its US school bus operations is likely to hold back earnings at rail and bus group FirstGroup after this year, according to Nomura.The Japanese broker, which has a 'neutral' recommendation and a 375p target price on FirstGroup, has upgraded its earnings per share estimates for the current year by 3%, but lowered them by 6% for the following year.Delays to planned cost reductions combined with a stagnant revenue outlook are likely to see profits much flatter next year, the broker predicts. However, it is encouraged by an improvement in revenue growth compared with 2009 in UK bus and rail operations and the Greyhound inter-city bus service in North America.Revenues from Greyhound at the half year stage fell to £309.4m from £326m over the same period the previous year, against overall revenues that climbed to £2.90bn from £2.77bn.BHP Billiton has doubled its share price since March last year, but there could be a bit more to come, if Ambrian has called it right.The broker says China's fourth quarter GDP statistics due on Thursday could, if back into double digits, fuel expectations of ever increasing Chinese appetite for commodities and the knock-on effect for pricing. Chinese growth is expected to have increased to 10.6% during the last three months of 2009, up from 8.9% the previous quarter. 'The fact that this growth might also herald further monetary tightening, due to a leap in inflationary fears, is likely to be 'put to one side' for now,' says Ambrian.The upside to its £22 price target is now a 'thin' 7%, but analysts there still recommend buying on any price drawbacks, like last week.'BHP Billiton remains a 'core' holding to any portfolio, with good exposure to oil, iron ore and copper, commodities that we think will continue to outperform as the global economy stutters back to synchronised growth,' it said.Charles Stanley is again unimpressed by the latest trading update from online fashion retailer ASOS.Most retailers would have been delighted with the sales growth of 30% ASOS posted in the 5 weeks to 3 January and the 38% for the 42 weeks to 17 January, but Stanley believes the figures were not good enough to justify the current high rating of the shares."This highly-valued stock demands continuous upgrades to consensus estimates - this statement does not deliver one. We therefore reiterate our Sell recommendation," it said.