Broker tips: RBS, Kier, Croda

24th Feb 2011 12:46

There was nothing in the full year results from Royal Bank of Scotland (RBS) to persuade Nomura Securities to abandon its preference for the UK's other part-nationalised lender Lloyds Banking.The Japanese broker reiterated its 'reduce' recommendation on Royal Bank of Scotland after the figures came in much as Nomura expected. While the fourth quarter results were 'in line' at the headline levels, with some signs of progress around disposals and deposit gathering, core business profitability remains challenged, according to Nomura. "We continue to believe that normalised returns are unlikely to exceed high single digits, which requires the group to improve core business profitability, excluding impairments, by over 50% to meet its target of at least 15% by 2013."Nomura has a preference for Lloyds, which it says remains more geared to retail and commercial banking operations in the UK.Nomura has a target price for RBS of 41p.Kier Group remains "steady and reliable", according to RBS, as the first half results confirm that the group's progress remains on track.Pre-tax profit for the six months ended 31 December was £31.3m, ahead of the broker's forecast of £30m, while the interim dividend of 20p per share was higher than the estimate of 19.1p.RBS says that the key features of the first half are the group winning £100m of work in the commercial market, and £85m overseas, "in accordance with how we view the group being able to partially offset the UK government capex [capital expenditure] reductions.""Kier is more advanced than others, in our view, at diversifying away from the areas of strongest declines in the UK public sector and its Support Services business has real credibility," says the broker.The target price stays at 1,605p.UBS keeps its positive stance on speciality chemicals group Croda as fourth quarter results came in ahead of expectations.Croda reported fourth quarter organic growth of 11.6%, with 6% volumes growth in line, but the 6% price increases came as a surprise and were well ahead of the broker's flat estimates, as the company succeeded in passing on increased costs to its customers.The results translated into earnings per share estimates being beaten by 14% in the quarter, and 3% over the full year."We see no reason to trim positions of a company with pricing power, growth and yield: sold out in 2010, Croda will make every effort this year to expand capacity, generating circa 5% headroom for volume growth," the broker says.With a positive outlook for 2011, UBS raises the target price to 1,850p, from 1,730p, and sticks with a 'buy' rating.