Broker tips: National Grid, IAG, Lamprell

8th Jun 2012 12:52

Credit Suisse has raised its target price for utilities giant National Grid (NG) and reiterated its outperform rating, saying that Ofgem's new RIIO regulation presents a 2.5bn-pound opportunity for the group."NG has started to perform well again, as negative perceptions on the balance sheet and dividend concerns continue to recede. The outcome of the UK price controls could address these concerns and provide the mechanism and incentives for NG to enhance overall returns," the broker said in a research note on Friday morning. The broker has raised its target price from 700p to 730p, partly reflecting lower weighted average cost of capital as borrowing costs have fallen.Investec has upgraded its recommendation for British Airways and Iberia owner International Consolidated Airlines Group (known as IAG) from sell to hold despite cutting its near-term forecasts."Establishing a fair value for IAG is complicated by the profile of profit expectations over coming years and confidence in management's ability to extract sustainable merger synergies and a structural cost-base reduction. Our model shows returns improving over the next three years, albeit still below cost of capital," the broker said.The target price for IAG has been lifted from 100p to 160p.Following the profit warning and Chairman departure at Lamprell, Nomura has reiterated its reduce recommendation and 125p target price for the energy markets-focused engineer. "In previous announcements, management attributed part of the blame on its vendors for not giving the company adequate notice of delays in critical components for its newbuild rigs," Nomura said.However, the broker thinks that the root cause lies with Lamprell "given that this sort of procurement challenge, which is characteristic of lump sum, is typically pre-empted by regular communication with the vendor and, where possible, the pre-ordering of key equipment that sits on the critical path of rig construction."BC