Broker tips: G4S, Diageo, Telecity

7th May 2013 12:18

In a research note released this morning analysts at Panmure Gordon highlighted how secure outsourcing group G4S has provided disappointing guidance on margins (down by 60 basis points), in its first quarter interim management statement (IMS), due to greater-than-expected pressures from various sources.This could result in forecast downgrades of 2013 earnings before interest, taxes and amortisations (EBITA) by 7-8 %, the broker said. Even so, and ahead of this mornings conference call with analysts, Panmure Gordon decided to reiterate both its target price (340p) and its buy recommendation.There are various reasons for that increased pressure in both developed and developing markets, some of which were already well known. However, in these analysts´ opinion the issues in the Netherlands coupled with charges in Africa suggests pressures are now more wide ranging across the group, they pointed out.Data centre operator Telecity on Tuesday morning said its year-to-date financial performance and full year earnings outlook continue to be 'in-line' with management's expectations. Ongoing growth of the digital economy has continued to drive strong demand for premium highly-connected data centre capacity across Europe which contributed to what has been a 'good start' to 2013, the company reported in a trading update."We see the stock having one of the most secure forecast outlooks versus other technology sector plays, many of which are seeing forecast weakness," Investec said in reaction to the above. "Combined with its recent period of share price consolidation, we believe this creates upside risk to the stock as the company continues to deliver and we retain our 'buy' and 1,000p price-to-earnings based target price," it added.The broker also called attention to Telecity´s purchase of Turkish group Sadece, which, "reflects the group's continued strategy of gradual expansion into new strategic territories."On Diageo´s decision to appoint Ivan Menezes as Chief Executive Officer to replace Paul Walsh, Investec analyst Martin Deboo said it was a well-flagged change that was unlikely to have much impact on the share price.Menezes, who has been Chief Operating Officer since last May, will step into the role on July 1st."For us, Menezes' immediate priority will be to deliver on Diageo's organic growth agenda, which has looked a bit less sprightly recently," he said."Beyond that, we think he needs to think about how best to evolve the strategy and portfolio, around which we continue to question the valuation creation from the integration of spirits and brewing." Investec expects revenue in 2013 to rise to £11.4bn this year, compared to £10bn in 2012 and pre-tax profit to increase to £3.3bn from £3.0bn. The broker retained its 'hold' rating and 1,970p target price on the shares. AB