Broker tips: Insurers, SABMiller, United Utilities

22nd Sep 2011 12:38

Credit Suisse has refreshed its views on the UK life insurance sector, staying positive with an outperform rating on Prudential, saying that it is a "structurally more attractive company given its geographic bias."Aviva is upgraded to outperform, as the broker thinks it has been oversold on European concerns.The broker upgrades Legal & General to outperform, saying it "offers the most attractive mix of capital resilience, dividend growth and relative value.""However, given less appealing relative value metrics and the effect of equity gearing on profit momentum, we have adopted neutral ratings on Standard Life and Resolution and downgrade St. James's Place to underperform."For Admiral, the broker does not believe that the stock can expand on a forward earnings multiple of 13 due to "regulatory, reserving and growth concerns".Investec has reiterated its buy rating on brewing giant SABMiller, following yesterday's agreed cash offer for Australian beer and beverages group Foster's.SABMiller announced on Wednesday that in addition to the headline offer of A$5.10 per share for Foster's, it is offering a further A$0.30 per share in the form of an incremental capital return to Foster's shareholders. Investec expects the acquisition to be 7% accretive to SABMiller's group earnings per share.However, the broker notes its caution regarding to the foreign exchange risks facing the group, saying that as a US$ reporter, SABMiller is exposed to the South African Rand and Colombian Peso. Also, the stock's recent outperformance (+6% above the FTSE 100 last month) represents a risk.Meanwhile, the broker has also highlighted some other risks to its 2,475p target price, including consumer demand uncertainties, changing commodities costs (barley) and a potential rival bid for Foster's.With no surprises in United Utilities' trading statement on Thursday, Investec reiterated its buy rating as the water group said it was on track to meet its targets."All is on track, and we think UU remains a safe haven in the present market environment," said analyst Angelos Anastasiou. "It has a yield of 5.2%, with a dividend policy of real growth of 2% per annum to 2015, and there is 18% upside to our target price of 720p (23% total return)," Anastasiou said.BC