Broker tips: Marston's, Serco, ASOS

24th Jan 2011 13:31

Pub group and brewer Marston's share price has taken a hit in the last couple of months making what Peel Hunt described as the best operator in the modern pub industry an even bigger bargain.Snow disruption, an "overwhelming exposure" to places with average public sector employment, and the north/south divide (the claim that the consumer economy will become increasingly two-state) are thought to have had an adverse affect on sentiment towards the stock recently. However, Peel Hunt thinks that these fears have been overblown, especially the north/south divide where, in the broker's view, "it is better the trade in a good location in a weak geography than the other way round.""Marston's in recent years has thrown off the vestiges of the old regional brewery model to become an effective contemporary retailer with a strong emphasis on value, backed up by interesting beer brands that give character to its pubs," says the broker.Peel Hunt recommends a 'buy', along with a target price of 124p.Outsourcing giant Serco has confirmed that it is not in talks over acquiring US group SRA International, much to the disappointment of Panmure Gordon, which described it as a missed opportunity for the group to become the "biggest foreign company providing services to the US government."The Telegraph reported that Serco had made an initial approach for SRA on Saturday for $2bn, but the group played down speculation in a statement issued Monday. However, "BAE could also be interested in this asset, which may have change the competitive landscape in the US for Serco, if proved successful," the broker said.SRA provides technology and strategic consultancy to the US government and operates in 50 locations around the world. "There is growing evidence that the US government is outsourcing many of its roles so the revenue synergies would huge," but "this would have been Serco's largest acquisition by some way therefore execution risk would also be high."Panmure maintains its 'hold' recommendation and 556p target price for Serco ahead of its results on 2 March "on the basis that we see a slowing organic growth profile during 2011, and prefer Capita ('buy', target price: 805p) and Babcock ('buy', target price: 750p) in the sub-sector at present."Broker finnCap said that ASOS remains one of its favourite retail growth stories but one of its least-favourite shares, as the online fashion group is an exciting, but expensive, stock.ASOS's third quarter retail sales increased by 59%, with UK sales growing by 22.6% and International sales surging by 156.4%. "Of course, the UK rate will have been depressed by the disruption to deliveries caused by the snow in December," said analyst David Stoddart.While the broker's initial reaction to the strong performance in the period was that it created further forecast upgrade potential, "it has subsequently emerged that extension of the free delivery and returns offer into the fourth quarter will offset this. Allowing also for additional costs of handling the disruption caused by the snow in December, we have trimmed our forecasts," Stoddart said.While finnCap's target price for the stock has been raised from 980p to 1,225p, the broker has cut its 2011 pre-tax profit forecast by around 5%. A 'sell' rating is retained.