Broker tips: Ladbrokes, William HIll, UBM, Intertek

14th May 2010 13:23

Today's earnings from bookmaker Ladbrokes were broadly in line with expectations, but analysts worry about the risk of increased gaming duty in the new government's emergency budget.Group net revenue fell 6% over the four months to April, with betting shop net revenue down 11%. Operating profit rose 3%, though this excludes high roller customers, where profit fell from £25m to £8.9m. EBIT, excluding high rollers, rose 3% year-on-year."We think risks remain on the downside, despite signs of improvement in machines and the potential for turnaround under new chief executive Richard Glynn," said Panmure Gordon.It repeats 'sell' advice and 141p target price, preferring Rank which it rates a 'buy' with 142p target. KBC Peel Hunt says an unimpressive top line at Ladbrokes is being mitigated by cost improvement, but questions what will happen when the cost savings run out.It prefers rival William Hill, which is trading on a 10% PE discount (ex high rollers) to 2010 and has strong momentum in its online business."We see no reason to turn more positive on Ladbrokes at this stage," it told clients Friday.A turnaround in bookings at United Business Media's events unit, its key profit generator, has convinced Singer Capital Markets to hike its target price on the shares by 20%.The events business, which accounts for 51% of EBIT, has increased Top20 12month forward bookings to 3.5% from -1.7% in early March.Growth at the Targeting Distribution & Monitoring (TDM) division and stability at the Print magazines business are also encouraging, says the broker.Singer ups its target price to 708p from 592p previously based on a 15x target 2010 "trough" earnings multiple, which equates to 13.3x 2011 estimates. But it admits even this is conservative given B2B (business to business) stocks typically trade on high teen prospective P/E's. Applying a 15-17x multiple range to 2011 earnings suggests fair value of 800-900p.Testing and inspections firm Intertek's organic growth rate has continued to slow during 2010, while the decline in the Consumer Testing unit is hurting margins, points out Ambrian."Whilst the longer term growth potential for the testing business should generate 8-10% revenue growth, the short term outlook looks much less promising. We recommend take profits and sell," the broker wrote in a note this morning.It thinks the extent of the pick-up in cyclical customer demand will be an important determinant of second half growth and into 2011. But it remains cautious about the outlook as key economies in Europe and in the US struggle to manage structural problems, while the shares, now trading on 16.6x current year earnings, appear fully valued.