Broker tips: ICAP, Unilever, Britvic

22nd Jan 2010 12:53

Interdealer broker ICAP slumped today after Barack Obama last night promised to limit the size of the proprietary trading operations of US banks.About 20% of ICAP's trading volumes relate to bank prop trading, although Panmure Gordon thinks this probably understates the actual significance of prop to the firm's flows.But the broker thinks that exacting the US president's legislation will prove both a problematic and lengthy process, while ICAP's recent efforts to diversify should mitigate the risk to earnings. For now, Panmure sees limited risks to ICAP and, with its valuation on an unwarranted 20% discount to its 5-year average forward, keeps its 'buy' stance and 520p target unchanged.For the thousands of UK-based Cadbury shareholders unwilling to hold Kraft stock following the American's hostile takeover should look at Unilever, says Charles Stanley.Charismatic new CEO Paul Polman has overseen £2bn of disposals and is masterminding £3bn of reinvestment and restructuring at the PG Tips to Lynx aftershave firm.The broker is looking for full-year sales of £35.87bn, reflecting organic sales growth of 3.4% and 1.6% pricing, plus a 20 basis point increase in adjusted operating margins to 14.8% when it reports results on 4 February.Given recent share price strength, it suspects these results are already factored into prevailing valuations. 'Trading off a mere 1.5x enterprise value (EV)/sales multiple we look for at least 20% share price upside over the medium term,' says analyst Jeremy Batstone-Carr who maintains his 'accumulate' recommendation on the shares.Soft drinks group Britvic should make a 'robust' start to the year and trade in line with a medium-term GB revenue growth target of 5%, Nomura said today.The Japanese broker thinks the current valuation does not adequately reflect the strong top-line outlook for GB growth as well as upward margin momentum.It maintains its 'buy' stance and 500p target price, and predicts a 2.2% increase in total company volumes for the first quarter, with revenues up 3.8%. GB should grow volumes by 3.9% and revenues by 5.9%.The valuation of 12 times estimated 2010 earnings looks attractive against a European beverages sector average of 15x, adds Nomura.