Broker tips: HSBC, Cadbury, Carphone Warehouse

19th Jan 2010 12:29

HSBC is weaker Tuesday after French broker Exane BNP Paribas cuts its stance on the bank to 'underperform' from 'neutral' with 700p price target.Analyst Ian Gordon says the decision reflects the emergence of 'genuine value opportunities elsewhere, rather than any material deterioration in the pace of HSBC's own recovery'. He notes that the company's outperformance during the first half of the financial crisis was driven by 'signature strengths' of capital and liquidity.'The latter has now become a millstone during what we see as an extended sub-par recovery in which an overwhelming desire to avoid policy mistakes will hold interest rates low,' he said.Having predicted that a level of around 850p per share would probably be enough for Kraft Foods to win the takeover battle for Dairy Milk maker Cadbury, Charles Stanley is now surprised at how 'meekly Cadbury has apparently acquiesced.'According to the broker, Kraft's revised terms value Cadbury on an enterprise value/earnings before interest, tax, depreciation and amortisation (EBITDA) ratio of around 13, 'somewhat on the low side of other deals struck in the global Food Producers sector.'Furthermore, the Cadbury chairman was only last week speaking confidently about how the share price could soon rise above £10 as the effects of the company's "Vision Into Action" programme kick in.With hedge funds now accounting for around 25% of Cadbury's shares, by Charles Stanley's estimate, the US predator looks as if it is halfway there to the 50.01% acceptances it needs for success, unless those hedge funds are holding out for a higher offer. The broker regards the chances as 'limited' of a counter-offer from US chocolate group Hershey; until this week Hershey was Cadbury's professed preferred partner in any merger. Hershey has until Friday of this week to announce a bid.The broker has maintained its 'reduce' recommendation and suggests Cadbury holders switch into Unilever if they want to remain exposed to the food producer sector.Mobile phone retailer and Internet Service Provider Carphone Warehouse has raised full year earnings guidance, but Collins Stewart is in no rush to upgrade its own earnings forecasts, while Investec and Evolution Securities both remain bearish on the stock.'Overall the third quarter interim management statement reflects a reasonably strong set of results, with slight upgrade to guidance and with an accelerated "special" 3.2p dividend, replacing the final,' notes Collins Stewart analyst Morten Singleton.The broker has maintained its 'hold' rating and left its price target at 200p.Evolution Securities rates the shares a 'sell' and has a target price of 163p, even with a 30% merger premium factored in.