Broker tips: Life insurers, ASOS, May Gurney

7th Sep 2012 12:23

Credit Suisse has downgraded its rating for Legal & General as part of its review of the UK life insurance sector.Among the growth-oriented insurers with higher price-to-earnings multiples, the broker said it prefers Prudential ('outperform') and St James's Place ('neutral') over Standard Life ('underperform') and Old Mutual ('underperform').Among the value-oriented companies, L&G has been downgraded from 'outperform' to 'neutral' due to "modest valuation upside potential" and remains 'neutral' on Resolution, saying that positive earnings catalysts appear some way off. As for Aviva ('outperform'), the broker stays positive, expecting execution on strategic plans to be supportive to sentiment.Jefferies has initiated its coverage of internet retailing giant ASOS with a 'buy' rating and 2,199p target price.In a research report titled 'Build a brand and they will come!', the broker said that its investment thesis rests on three key ideas: "ASOS is a dynamic disruptor in a surprisingly staid industry, the business model defines operational leverage and delivers strong RoIC [return on invested capital] and lastly, our proprietary brand analysis indicates real competitive advantage."Following the sell-off seen in May Gurney shares on Thursday, Investec has retained its 'sell' rating and 100p target price for these shares, saying that it will take some time for the infrastructure services firm to rebuild confidence."Yesterday's news came as a shock to us, especially with the departure of the CEO, and, whilst the group had previously flagged that there were issues in some business units, the problems seem to have magnified," said analyst John Lawson."Whilst most of the business seems fine to us and the order book looks healthy (valued at £1.5bn), it could take some time to rebuild investor confidence. Hence, we are not in a hurry to change our negative view."BC