Broker tips: RBS, Morrisons, ASOS

12th Mar 2015 11:40

Investec has raised its stance on RBS from 'sell' to 'hold' following an 11% drop in the shares since the bank's annual results on 26 February.Following the results, the broker now forecasts RBS to record an eight successive attributable loss in 2015, predicting a loss of £0.9bn. It had previously estimated a "break-even" result for this year, but has cut profit forecasts and raised restructuring cost predictions due to the accelerated shrinkage of the corporate and institutional banking division. As such, Investec's target price for the stock has been cut from 380p to 375p.Shore Capital has retained a 'buy' rating on Morrisons despite a "tumultuous" year for the supermarket group, hailing the company's free cash flow (FCF) potential in the future.The broker said that FCF is central to its positive stance on Morrison's shares: "Without material leasehold obligations compared to its UK superstore peers, and noting a comfortable pension position too (c£40m deficit), we see the group as being in a relatively favourable position with which to commence shareholder friendly initiatives." These include restarting a progressive dividend policy, the possibility of a share buyback and the capability to consider complementary acquisitions or organic investment again. Analysts generally applauded the building momentum seen at ASOS in the second quarter, though a sharp fall in margins at the online fashion retailer did divide opinion.N+1 Singer, which rates ASOS as a 'sell', said the top-line acceleration "has come at significant expense in terms of margin investment, with a slightly adverse mix effect too".However, Shore Capital said the recent investment in zonal pricing "is a positive step in the long term". The broker said: "Given the significant currency exposure ASOS encounters as a global business, the additional agility zonal pricing gives the company in structuring its pricing proposition for international consumers and we believe this investment will help to support future growth momentum."