Broker tips: Oil explorers, Anite, Interserve

6th Jul 2010 10:58

Nomura Securities says oil explorers and producers have been flavour of the month in July, buoyed by a prospective bid for Dana Petroleum and the exploration success in the UK North Sea by Premier Oil."The [explorers & producers] group is drilling for prospects that could be worth up to 100% of current market valuations over the next six to nine months, led by Cairn (Greenland), Tullow (West Africa) and Soco (Congo)," Nomura analyst Alastair Syme notes.Syme says that industry consolidation is back on the menu and suggests that one of the side effects of the oil spill in the Gulf of Mexico "may be that companies have a higher risk appetite for non-US assets." Nomura's preferred stocks in this sector are Premier, Afren and Tullow, all of which the broker feels offer a combination of valuation support and good quality exploration exposure.Sector wide uncertainty is likely to dampen enthusiasm for Interserve, the services, maintenance and building group, despite the attractions of the 9.4% dividend yield, according to KBC Peel Hunt.The broker has downgraded its earnings per share (EPS) forecasts for the current financial year (2011E) by 9%, putting it towards the lower end of the range of market forecasts. With "few triggers for a re-rating" KBC Peel Hunt now rates the shares merely a "hold", down from its previous stance of "buy"."Interserve has a broad portfolio of activities and continues to offer long-term growth opportunities. However, we believe that the near term is likely to remain challenging for all sector participants as volume pressures combine with pricing pressures. However, the income attractions remain a key support and this is likely to limit underperformance," KBC analyst Andrew Nussey believes.Despite what it sees as a mixed set of results for Anite, Panmure Gordon has upgraded its recommendation on the wireless equipment tester's shares, while KBC Peel Hunt is also feeling more bullish about the shares.The broker has raised its target price from 23p to 33p, having revised its earnings per share (EPS) estimates for the current year from 2.2p to 2.9p to take into account a lower than expected tax charge. As a result of the change in the target price the broker's recommendation moves from "sell" to "hold".Panmure Gordon's assessment of the results can broadly be summarised as: "Teleco improving, Travel woeful".Panmure analyst George O'Connor points to the fall in UK revenue from £25m to £15.4m as a reflection of how poorly the Travel business is doing, while Managed Services revenue fell from £10m to £5.2m, "again reflecting a deteriorating Travel business."KBC Peel Hunt thinks that the year to 30 April 2010 (FY2010) may have been a trough year, judging by the improving margin trend in the second half of that year.The broker is optimistic about the company's ability to capitalise on the introduction of new technology in the wireless arena."The roll-out of 4G networks is still at an early stage and visibility is limited. However, it will be a strong demand driver going forward. A book:bill of 1.0 suggests that trading is stable and trading in FY2011E will be second-half biased again, but less so than in FY2010," suggests KBC analyst Simon Strong.As a result of the margin improvement in the second half of last year the broker is moving its stock recommendation from "hold" to "buy".Astaire Securities, meanwhile, already had a "buy" recommendation on the stock and is sticking with it after revenue and profits came in ahead of the broker's forecast. "The uptake of 4G/LTE (long term evolution) and Anite's ability to exploit that opportunity is central to our BUY recommendation and 40p price target," the broker said.Astaire did have some misgivings about the decision to drop Agilent as its hardware partner but says "to date it is progressing well".