Broker tips: Persimmon, ASOS, NCC

23rd Apr 2010 13:14

Panmure Gordon has reiterated its 'buy' recommendation for Persimmon following the housebuilder's interim management statement earlier this week."We believe that its aggressive stance on write-downs versus its peers and the prospect of another year of strong cash generation in 2010, leave the business well placed to deal with a range of market conditions," Panmure Gordon thinks.If prices are on the rebound then Persimmon may be inclined to write up the value of its land bank when it releases its interim results, which would "offer protection to the downside" in terms of the share price valuation.Panmure Gordon also likes Persimmon's strong cash generation and thinks the company "is unlikely to need a dilutive fundraising at any point, and should therefore report robust NAV [naet asset value] numbers."As well as reiterating its 'buy' recommendation the broker has maintained its 555p target price. FinnCap has initiated coverage of stock market darling ASOS with a 'sell' recommendation, setting it apart from all but one of 15 other brokers that cover the stock and which either rate it as a 'hold' (five brokers) or a 'buy' (nine brokers).Finncap attributes the enthusiasm for ASOS to the fact that it is "one of the relatively few pure-play online retail investments." Online is where the fast growth opportunities are for most retail businesses now, Finncap acknowledges, and that will continue to underpin the premium rating of an online specialist such as ASOS.However, after the recent upsurge in the share price FinnCap thinks the share price is looking frothy as "the upgrades that used to regularly accompany updates have become less frequent.""Unless earnings growth accelerates, it is hard to argue for a further re-rating. Indeed, one could argue that the current rating does not allow for execution risk or increasing competition," analyst David Stoddart suggests.The broker has a 550p price target for ASOS. The bolt-on acquisition of SDLC, a provider of software and network testing, looks like a good fit for both the Assurance Testing and Escrow divisions of NCC Group in the view of KBC Peel Hunt.The broker has responded to the acquisition by provisionally upgrading its earnings forecast for the current year by 9% and next year by 10%. The target price is lifted to 540p from 489p."The strategic fit with the Assurance Testing business is relatively obvious, but also may help to ease some of the bottlenecks in that business in meeting demand. We also see good cross-selling opportunities for Escrow as part of the software assurance workflow, with further potential synergies with Verification work," suggests KBC analyst Alex Jarvis.