Broker tips: Petrofac, Carpetright, UK house-builders

13th Dec 2011 12:34

Investec has reiterated its buy rating on oilfield services giant Petrofac, following the group's pre-close trading update in which it said it expects to deliver like-for-like (LFL) profit growth in 2011 of at least 20%."Petrofac continues to make good progress on all fronts and we maintain our positive stance on the stock. Into the medium term the newly-created Integrated Energy Services (IES) division could offer meaningful growth and returns, within five years this segment could become as large as the whole group was during FY10, in our view."The target price of 1,705p and other forecasts are put under review until a conference call with the firm.Panmure Gordon has upgraded its rating on flooring specialist Carpetright from sell to hold following the recent slump in the stock which has seen its share price more than halve over the last 12 months.The firm reported on Tuesday that pre-tax profits swung into the red after accounting for restructuring and store impairment charges - loss before tax came in an £0.8m in the first half ended 29 October, compared with a profit of £9.8m the year before. UK like-for-likes sales fell by 2.4%, while the gross margin dropped 430 basis points."While management optimism may not come through in H2 numbers, there are grounds for supposing that these figures represent the nadir."Seeing as though the stock - which reached an 52-week high of 835.5p in January - has now slipped below Panmure's target price of 400p (closing yesterday at 395.4p), the broker raises its rating to hold.In its assessment of the UK house-building sector, UBS hails has warned that the upcoming year will be tough on stocks given the more challenging macro-economic outlook.UK house-builders have outperformed the FTSE All-Share index by 25% in 2011 so far, UBS notes, despite a difficult mortgage market. However, the Swiss broker has cautioned that "the macro environment is likely to become less supportive into 2012, with no GDP growth and banks facing increasingly difficult funding markets".UBS's sector preferences are FTSE 250 peers Berkeley and Persimmon (both of which are given a buy rating) as "high-quality and high-return plays". Barratt Developments(buy) should also be preferred as the "leveraged value play over Bovis" (which is downgraded from neutral to sell on valuation grounds), the broker said. Bellway has been downgraded from buy to neutral, while Redrow and Taylor Wimpey are also given neutral ratings.Panmure Gordon still believes that house prices will remain "volatile" over the next 12 months, and while the market outlook for UK residential remains difficult, it should be broadly stable in the near-term. The broker's key recommendations at Barratt Developments (buy with a target price of 158p) and Galliford Try (buy with a target price of 577p).BC