Broker tips: Glaxo, Standard Life, Unilever

29th Apr 2010 12:35

Citigroup, UBS and Panmure Gordon remain buyers of GlaxoSmithKline (GSK) following the drug giant's first quarter numbers yesterday.Sales growth excluding the boost from swine-flu related drugs was 4%, two percentage points ahead of consensus, Citi said.The broker, which keeps its 'buy' rating and 1,375p target price on the stock, thinks sustained delivery of top-line growth, fuelled by growth in emerging markets and in its consumer business, will maintain investor interest.UBS, which also has a 'buy' stance on the stock, lifts its target price to 1,525p from 1,475p.It also been impressed by strong emerging markets and consumer healthcare growth at Glaxo and adds that 'with GSK rapidly increasing its exposures to emerging markets and consumer healthcare, and better globalizing its businesses the need to drive growth via pharma R&D is diminishing.'With a 'buy' recommendation and 1,400p target price, Panmure says that Glaxo's results were in line with its forecasts and notes that the stock trades at around 9.7 times 2011 earnings and 8.8 times 2012 earnings.One concern for the broker is disappointing phase III data recently for the lupus disease treatment Benlysta, which showed the efficacy of the drug on patients seemingly waning after a certain period of time.'If the drug's efficacy truly decreases over time, it would represent a significant downgrade risk because lupus is a chronic disease and ideally the drug should maintain its efficacy or even possibly improve it over time,' Panmure said.A Panmure Gordon upgrade has got pulses racing at Standard Life whose shares have fallen "too far", according to the broker.The insurer today unveiled a 30% increase in first quarter worldwide life and pensions new business to £4.65bn, about 23% better than consensus and 11% above the highest forecast.Much of the improvement was down to the UK, driven by SIPP, Investment and mutual funds, while good prospects for further growth in the UK for SIPP and Wrap products combined with a launch of new products, complete the rosy outlook."The shares have massively underperformed but we believe that the share price has now fallen too far trading at a 35% discount to 2010F Embedded Value and a 6.4% yield," said Panmure.Standard's 2009 profit, published last month, beat expectations, but the shares have traded sideways for the last three months and been flat over the last 12."Whilst the UK market remains a tough place to be the Q1 figures show a momentum that we believe will be continued throughout 2010 and into 2011," the analysts say.The rating rises to 'buy' from 'hold' but the target price has been kept at 225p. Results from consumer goods leviathan Unilever were better than expected but Charles Stanley thinks the scope for earnings upgrades is limited in view of expectations that trading conditions will get tougher as the year progresses."Commodity costs will increase over H2 2010 [second half of 2010], economies will remain sluggish and competitive intensity will remain high," Charles Stanley analyst Jeremy Batstone-Carr predicts.The Anglo-Dutch company continues to focus on profitable volume growth whilst delivering sustainable improvements in operating margin and strong cash flow, and the shares are rated below many of its global peers at 14 times projected 2011 earnings, Batstone-Carr notes.The yield is supportive, the broker adds, and underpins Charles Stanley's unchanged "accumulate" recommendation.