Broker tips: RBS, Morrisons, Providence Resources

11th Oct 2012 13:17

Credit Suisse has increased its target price for Royal Bank of Scotland to 190p from 180p, while maintaining its 'underperform' rating.RBS reports its third quarter results on November 2nd and Credit Suisse has reduced its estimated 2012 underlying loss per share from 7.6p to 3.3p, following the Swiss Bank's own upgrade on revenue expectations for markets. As well, Credit Suisse has moderately increased its 2013 earnings per share estimates for RBS from 8.9p to 12.2p.However, RBS is still its "least preferred UK bank" as it sees below sector profitability and ultimately believes that a more substantial restructuring will be necessary.It still doesn't expect RBS to resume dividend payments over its forecast period 2012-2015. Analysts at Seymour Pierce have initiated coverage of Ireland-focused oil exploration group Providence Resources with a 'buy' recommendation.Providence's success at Barryroe has had a transformational effect on its share price, the broker notes, but "the company's exploration and appraisal campaign is far from over," Seymour Pierce reckons. The company intends to target multiple prospects across five further geological basins. "2013 should focus on high impact exploration at Dalkey Island, Dunquin and the Rathlin Basin; and moderate risk development drilling at Spanish Point," the broker discloses.Seymour Pierce has a 1,539p price target for Providence.Credit Suisse has cut its target price for Morrisons supermarket to 290p from 320p, downgrading it from 'outperform' to 'neutral'.Analysts at the Swiss Bank said that after weak first half sales, they thought that Morrisons needed to get back on form, but it hasn't. "It appears to us that Morrisons' marketing, promotions and in-store execution are currently not sharp enough. We still hope this is a temporary loss of form and not a longer-term strategic issue."The broker is thus reducing its target price following cuts to its full year earnings estimates by 2%-3% and a less optimistic long-term margin outlook. Credit Suisse analysts conclude: "We still think Morrisons can deliver a solid full year profit performance, even given weak like for like, but it needs some sales momentum. Meantime, although it does not look high-rated at 9.4 times 2013/14 estimated price earnings, we do not expect it to outperform near-term and cut our rating from Neutral to Outperform."JH