Broker tips: Home Retail, Wolseley, Misys

28th Sep 2009 13:16

Concerns about the threat Tesco Direct poses to the Argos brand has prompted Credit Suisse to downgrade Argos owner Home Retail.The Swiss bank now expects the shares to underperform, having previously been neutral on the stock. Analysts at Credit Suisse (CS) have been poring over the Argos catalogue and reckon that prices in the current season are up by around 10% year on year, though the effects of these increases are typically offset by tactical price cuts. CS added that Tesco Direct was cheaper than Argos 'across a far greater number of products'.The bank has a 235p price target for the stock. Today's well received results from plumbing supplies merchant Wolseley could represent a watershed for the heavily indebted FTSE 100 company, broker Charles Stanley reckons.Though the company announced a staggering post-tax loss of £1.17bn the broker takes 'some solace from some of the more positive trends such as that of improving cash flow in spite of the lower profitability.''The Wolseley share price has participated in the cyclical led stock market rally with about a 40% rise over the last six months and this has left the shares looking fully valued,' reckons investment analyst Tony Shepard. 'For example, the 2010 and 2011 P/E [price/earning ratio] is 16x and 14x respectively. These multiples appear higher than those of the peer group such as Travis Perkins.'Despite these misgivings, the broker has kept its recommendation at 'hold', and feels 'that there may be a strong profit recovery beyond 2011.'Financial services and healthcare software provider Misys may be worth less than the sum of its parts and could be ripe for dismantling, reckons Jefferies International.The broker rates the shares a 'buy' and has raised its price target from 198p to 260p after doing its sums on the likely prices its three divisions could bring in trade sales.Jefferies reckons the healthcare division could be the first to go, given the back-drop of 'the substantial budget allocated to incentive payments to physicians for deployment of EHR [electronic health record] solutions.'The Banking and Treasury Capital Markets divisions 'are equally attractive merger and acquisition targets,' reckons Jefferies, with banking software solution provider Temenos said to be interested in these business, though it would likely face competition in a bidding war from the likes of Tata Consultancy, Oracle, Fiserv and Sungard, the broker speculates.