Broker tips: RBS, Petrofac, Euromoney

25th Sep 2009 12:57

The share price of part-nationalised bank Royal Bank of Scotland (RBS) has recovered from just above 35p in mid-July to more than 50p, a rally that continues to perplex Goldman Sachs.The US investment bank expects RBS to remain loss-making in the short term, while the threat of another cash call continues to hang over the bank's shares.Goldman Sachs suggests that as an alternative to a rights issue RBS could sell off some or part of its US operations in order to reduce debt, given that no one seems very interested in buying the group's insurance operations at RBS's asking price; the insurance units, including Direct Line and Churchill, have been on the selling block since April of this year.US investment houses Goldman Sachs and Merrill Lynch dealt oilfield support services group Petrofac a double-blow on Friday with some bearish comment.Merrill Lynch has downgraded Petrofac to 'underperform' from 'neutral', with a price target of 930p.The US broker believes that the recent improvement in contracting activity has been at the cost of reduced margins.Goldman Sachs goes a little easier on the stock, downgrading it to 'neutral' from 'buy' after the share price's recent good run. The market has given a big thumbs-up to the trading statement by Euromoney in which the business publisher raised profit guidance for the current year.The group said adjusted pre-tax profit will be no less than £57m for the year, down on last year's £67.3m but ahead of expectations. Singer Capital Markets notes that prior to Friday's statement, market consensus for current year profit before tax was £50.7m.'Assuming FY10 forecasts are raised to [earnings per share of] c35p the stock would trade on P/E 8.8x. With comps [comparative figures] set to get easier and cost action protecting profitability the stock looks on the cheap and could re-rate to 10-12x ahead of a revenue growth recovery,' Singer's Jonathan Barrett reckons.Singer beleives the upbeat trading statement from Euromoney bodes well for sector peers UBM and Informa, 'which have similar product exposures (segment exposures are much wider than ERM [Euromoney] financial focus) and in particular we highlight the strong cost control being delivered across the sector that is offsetting significant revenue declines.'UBM and Informa both trade on a multiple of 10 times Singer's 2010 earnings per share estimates, and 'could rerate further to c12x ahead of revenue growth recovery,' Barrett speculates.