Broker tips: Greggs, Robert Walters, Sportingbet

6th Oct 2010 13:11

FinnCap's full year revenue forecast for sausage rolls and pies seller Greggs is looking a little flaky after a cautious third quarter update from the bakery chain.The broker had been expecting Greggs to achieve 0.5% like for like (LFL) sales growth in the second half of 2010 but with Greggs' third quarter LFL sales growth trundling along at 0.2% and management suggesting that there will be little or no organic sales growth in the fourth quarter, FinnCap expects to trim its full year sales forecast of £668.9m."With forecasts unlikely to change much, if at all, in response to this morning's announcement, there seems no reason to change recommendation," said FinnCap analyst David Stoddart. FinnCap's recommendation is to hold the shares and enjoy the "decent, if unexceptional yield, augmented by a share buy-back programme." KBC Peel Hunts says Robert Walters is firing on all cylinders - an unfortunate term to use when describing a recruitment firm - and full year earnings upgrades are expected after Wednesday's interim management statement.Third quarter net fee income came in ahead of Peel Hunt's expectations at £42.5m; the broker had pencilled in a figure of £39m for net fee income. According to management, the business is running about as well as it could be, maintaining the momentum into the fourth quarter.Peel Hunt expects to upgrade its clean profit before tax forecast for the current year by around 10% from £10.8m in the wake of the trading update. The target price for the stock has been bumped up by 30p to 320p."Robert Walters is a well run, quality recruiter with excellent and diverse international exposure and we have promoted it to our conviction list," Peel Hunt analyst Henry Carver said.In Carver's view, the share "offers investors all the qualities Michael Page does (bar liquidity) but at a better price." A solid set of full year results for Sportingbet has seen the group exceed Daniel Stewart's expectations.The results were driven by a strong net gaming revenue which climbed 26.8% to £207.5m from £163.6m a year earlier. Pre-tax profit slumped to £6.9m from £22.3m, due to the US Department of Justice (DoJ) payout of £22.8m relating to Sportingbet's internet gaming business in the US between 1998 and 2006.Daniel Stewart analyst Michael Campbell states that the company "has a broad betting offering and geographic spread, and should continue to deliver a strong sports margin. The shares have been admitted to the official list and Sportingbet has also joined the FTSE 250."Campbell reiterates the 'buy' status saying Sportingbet "offers a market-leading product, has consistently delivered earnings growth, has increased the dividend payment to shareholders and with more cash than expected we remain buyers of the stock and retain our derived target price of 130p", giving an upside to the current share price of 64.1%.KBC Peel Hunt is also a buyer and would like to see Sportingbet take part in the current round of consolidation in the online gambling market. "The settlement with the DoJ provides the opportunity to do this and on balance we believe that there is further upside to come. However, in the meantime investors need to be comfortable with the short-term risks associated with potential legislative developments in Greece and Spain," Peel Hunt analyst Nick Batram said.Peel Hunt's price target for Sportingbet is 89p.