Broker tips: Ladbrokes, Tesco

21st Apr 2010 12:58

The £80m rebate from the tax man was an unexpected windfall that KBC Peel Hunt has not accounted for in its earnings forecast for bookie Ladbrokes. "Whilst it doesn't change the fundamental challenges facing the group it is another positive piece of news following the Canal+ joint venture and the exit from Italy," the broker notes.Panmure Gordon has bumped up its earnings estimates for Ladbrokes to account for the windfall, which it anticipates will reduce the net finance charge by £20m in 2010. "This leads to 13.5% increase in 2010 earnings per share to 15.1p and 5% per annum in 2011 and 2012 to 14.1p and 14.5p respectively," the broker said.The broker's price target for Ladbrokes is lifted to 141p from 125p but Panmure Gordon remains bearish on the stock in the belief that "the turnaround job for incoming chief executive Richard Glynn will take longer to achieve than the market currently believes."The market's reaction to Tuesday's results from Tesco was lukewarm but Charles Stanley thinks the supermarket's full year results were solid and creditable given the tough economic environment.The broker has left its earnings per share forecasts unchanged at 32.5p for 2011 and 35.8p for 2012 but believes "forecast risk is on the upside.""Going forward, we expect Tesco to continue to deliver high single-digit / low double-digit growth in underlying earnings and dividends," writes Charles Stanley analyst Sam Hart."International and Retailing Services (Tesco Bank, Tesco Mobile etc) are expected to be the growth drivers, with the core UK food retailer business being used as a cash cow to fund growth in these areas. We believe long term earnings growth prospects remain the best in the sector," Hart proclaims.The valuation still looks undemanding in the broker's eyes, and it has reiterated its 'accumulate' recommendation.Elsewhere, Societe Generale has changed its view on Tesco from 'sell' to 'hold' while Credit Suisse has upped its price target for the supermarket titan to 460p from 400p.