Broker tips: Glencore, Xstrata, Michael Page...

9th Jul 2012 11:08

Jefferies expects commodities marketer and producer Glencore to bump up its proposed merger ratio for Xstrata and says that following the stocks' recent underperformance, shares of both groups are now more attractively valued."We continue to have a positive view on shares of BHP Billiton and Rio Tinto, which are our top picks for long-term investors. But at this point, we would recommend that investors buy shares of Glencore and Xstrata as well."Jefferies thinks that Glencore will eventually raise its proposed merger ratio from 2.8 to at least 3.0 Glencore shares per Xstrata share in order to win the approval of Xstrata shareholdings, especially Qatar Holdings, the 10.4% stakeholder that has come out and demanded better terms.Investec has placed its 365p target price for Michael Page International under review after the recruitment firm reported a tough trading environment in the second quarter."Trading conditions deteriorated significantly in the second quarter of the year and although gross profits are up on the seasonally weaker first quarter, they are down on the comparable period last year," said Investec analyst Robert Morton."Whilst profitability will clearly come under further pressure in the short term - we will be reducing our forecasts - we believe that recovery and longer term structural growth prospects remain intact and maintain our 'hold' recommendation," Morton said.Nomura has retained its 'bearish' view on the European utilities sector, saying that there are downside risks to guidance across the industry.According to the broker's recent investor survey, some 70% of respondents see downside rise to 2013 earnings per share estimates. "With our bearish outlook for power prices, economic headwinds, the risk of political intervention, potential regulatory changes, and ongoing disposals we agree with this sentiment," Nomura said."We also see challenges at Centrica and SSE. From the integrated names, our top pick is E.ON given our view it will meet guidance, with this in turn supporting the dividend and consequent attractive yield. As a group, we like the regulated subspace with top picks National Grid, Snam and United Utilities."BC