Broker tips: Kesa Electricals, Thomas Cook, Chariot Oil and Gas

14th May 2012 11:19

Investec may have slashed its forecasts for electrical retailer Kesa Electricals but the broker has decided to raise its rating on the stock from sell to hold.Since the disposal of Comet in November 2011, Kesa's share price has continued to weaken "as investors fret over the macro-economic implications of the Eurozone crisis on consumer confidence and spending prospects," Investec said in a research note on Monday. "We welcome the monetisation of Darty Box, which has not lived up to its launch expectations in our view. The net impact of this cash inflow with further downgrades is neutral on our sum of parts valuation."Nevertheless, the broker says it sees limited downside risk from here with the shares having come close to its 57p target price, hence the upgrade. UBS says that Thomas Cook's recent financial deal is just a short-term fix and is 'kicking the problem down the road'."Whilst the new financing helped avoid the issuance of further capital in the short-term, the new deadline of 2015 on existing financing puts significant pressure on the operational turnaround of the business, in our view. [...] We believe additional financing costs will significantly reduce shareholder returns and see no prospect of a positive post-exceptional cash-flow yield to shareholders before 2016," the broker said.After having cut its full-year (ending 2012) earnings before interest and tax (EBIT) forecast by 14% - similar reductions have been made for 2013 and 2014 estimates - UBS has reduced its target price for Thomas Cook shares from 23p to 21p.Jefferies has reiterated its buy recommendation for AIM-listed explorer Chariot Oil and Gas despite the recent disappoint at its Tapir South frontier exploration well in Namibia.Preliminary logging results have shown that, although excellent reservoirs were penetrated, no commercial hydrocarbons were found and the well will be plugged and abandoned. Jeffeiries says that Tapir South is valued at 90p per share (25% of the stock's 355p target price). Nevertheless, with around $100m in cash remaining (on the broker's estimates) after Tapir South, it believes that the company is "well-funded to continue to explore the potential of its large frontier acreage position in Namibia and Mauritania."BC