Broker tips: IMI, Misys, Amlin

5th Mar 2012 11:21

UBS has raised its target price for FTSE 100 engineer IMI but maintained its neutral rating, saying that the group is improving margins at the expense of growth.With macro concerns easing, UBS says that the company is now past the threat of a big volume drop. While the organic growth rate remains in the low single-digit rate in 2012 (around 2%), the broker has raised its earnings per share forecast by 8% as a result of M&A, tax and share count. The target price is lifted from 900p to 950."We like the returns profile at IMI and management have executed a great margin story. We are slightly concerned on the lack of growth though as the 2011 pace of 5% is the lowest in the sector. Headwinds remain in 2012 too which means achieving 2x GDP looks a stretch."Merchant Securities says that Misys's latest approach from CVC and ValueAct is the most likely to go through."We had viewed the approach of Vista as unlikely to culminate in a bid, given Vista's size and proclivity for smaller deals. However, CVC is a much more likely bidder, and the market will speculate that the potential exit price could now be closer to 400p than the 360p level. This price would be amazingly high," said Merchant analyst Roger Phillips."The announcement is fresh evidence that a Temenos/Misys merger represents the worst possible outcome, at least from ValueAct's perspective."The broker has kept its hold rating on the stock, but says that the shares would provide strongly today, possibly up to the 350p mark. By 10:25, they stood around the 338p level, up nearly 7% on Friday's close.While Amlin's results were met with a negative reaction from the markets on Monday, Nomura has maintained its buy rating and 383p target price for the stock, saying that the group is well-positioned for 2012."We believe the capital position of the company means it is still well placed to capitalise on the positive outlook for 2012. Meanwhile, greater reinsurance protection means lower volatility in results, and hence provides some comfort around the prospective [return on tangible equity] of 19%." the broker said.Nomura is also encouraged by the company's actions on Amlin Corporate Insurance (ACI) and this, coupled with some remaining multi-year contracts coming off the book in 2012, means that the broker is "confident management will turn the business round".BC