Broker tips: Man, Next, Dragon Oil

21st Apr 2011 12:24

RBS raises the target price for Man Group and moves to a "glass half-full" stance, saying that the hedge fund manager is now trading on more realistic earnings and valuation metrics following recent declines."Man Group has disappointed the market on fund flows over the past two quarters and thus our bear case should now be largely factored into the share price. We see gradual fund flow improvement for the group over the next 12 months," the broker said.While a 'hold' is maintained, the target price it increased to 270p, from 244p previously.With a better margin outlook at fashion and homeware retailer Next, UBS hikes up its earnings forecasts and target price, keeping its 'buy' recommendation."Comments from M&S and Debenhams suggest the industry is acting rationally in raising prices and reducing volume orders. Inventory increases reflect timing issues and inflation. Although early days, markdowns may be less than we expect and we assume that gross margins decline by 25bp less than before, giving -75bp for Retail and -50bp for Directory," said the broker.The broker ups its pre-tax profit forecasts for the 2011-12 year by 2% to £550m. As a result of reduced gross margin pressure, the target price it raised to 2,450p, from 2,250p.As a result of Dragon Oil increasing its production guidance for 2011, Nomura raises its earnings forecasts, saying that "operational delivery [is] on track." The Turkmenistan-focused oil and gas producer announced on Thursday that it has upped its production growth target to 20% for 2011, while maintaining its 10-15% per annum (pa) guidance for 2011-13."As a result of the production uplift for 2011 and our increased confidence over production growth in the medium term (our production outlook is lifted by circa 7% pa for 2011-15), we have raised our earnings forecasts by circa 7% pa for 2011-15 and our target price by 10p to 765p (from 755p)," the Japanese broker said.With a strong cash position of £1.31bn at the end of the first quarter - "which, in our view, provides sufficient financial flexibility at least to maintain its circa 20% dividend payout" - the broker keeps its 'buy' rating.---bc