Broker tips: Gulf Keystone, Wolseley, Capital Shopping

20th Sep 2012 14:33

Analysts at WH Ireland have issued a bullish note on Gulf Keystone Petroleum this morning. The broker highlights the recent positive news-flow on the company -including the apparent resolution of the stand-off between authorities in Baghdad and Erbil and the construction of a new pipeline through Turkey- along with several other factors as possibly heralding a move by the company into the main FTSE index, from AIM. As regards the latter factors WH Ireland highlights the fact that: "The company is on track to achieve 150,000bpd by 2015 and importantly has an array of funding options at its disposal to fund development including the sale of its 20% working interest in the Akri-Bijeel block, debt options and with early production from Shaikan set to reach 40k barrels per day by the first half of 2013 and this could provide valuable cash flows (assuming Baghdad continues payments).These analysts also hold out the possibility that the company might yet be "taken-out."We maintain our BUY recommendation and target price of 315p which implies a healthy 26% upside from here and reiterate our 450p take-out target, they conclude.After a strong run in the share price, passing their target price on the way, analysts at Panmure Gordon believe it is time to lock in some profits on Wolseley. Hence, they cut their recommendation from Buy to Hold, while maintaining their 2500p target price.Their forecasts for a fiscal year 2012 earnings per shares (EPS) of 162p, versus a consensus estimate of 160p, and a fiscal year 2013 EPS of 184p (Consensus: 183p) imply a calendar 2012E price-to-earnings multiple of 16x falling to 14x. That compares with its near UK peers on circa 11x, although Home Depot appears to be on 18x.Nevertheless, the broker admits that the company´s shares offer a sound long-term investment case. Panmure thus adds that: "We have been impressed with the action taken by management in recent years, with many of its problem businesses sorted out. The 63%/37% North America/Europe split is still an attractive "mix," until signs of a stronger European recovery emerge."In a research not sent to clients this morning analysts from Seymour Pierce indicate that they will be closely watching for the success -or not- of real estate investment trust (REIT) Capital Shopping Centres´ just announced debt issue. In their own words, the transaction "[adds] to the proliferation of debt and equity raises in the sector." More specifically, they point out how the terms offered are somewhat higher than those offered by British Land in a recent debt sale of its own. As well, Seymour Pierce adds that: "Given the equity yield of 4.4%, and that CSCG is currently trading at an 11.3% discount to its June 30 2012 net asset value of 390p, the success of the issue is purely predicated on debt funds which have to deploy into the debt or convertible market rather than investors with a choice between debt and equity.""If the issue is successful and the other equity divestments occur we believe this may be very good news for the group as it would go a long way to rectifying the core financing problems of the group which we have regularly highlighted. The shares should react positively to the success of the issue and we will be reviewing our forecasts once the outcome has been published."Seymour Pierce currently has a "reduce" on shares of Capital Shopping Centres and a target price of 327p. AB