Broker tips: RBS, Ryanair, AB Foods

3rd Nov 2009 13:06

The market has reacted badly to the revised terms of Royal Bank of Scotland's participation in the government's asset protection scheme, and the analysis from stockbroker Killik implies it has been right to do so.'In order to promote greater competition in UK banking and to meet EU State Aid rules, the level of divestments is greater than expected and underscores the fact that the European Commission is clamping down on those banks that have accepted a large level of state aid,' notes Jonathan Jackson, head of Equities at Killik.'Overall, given the complexity of the scheme and the continued uncertainty hanging over the company, we find it difficult to recommend holding RBS,' Killik concludes.FinnCap has described an investment in Associated British Foods as 'one to sleep easily at night with,' after the Primark owner topped market forecasts with its results on Tuesday morning.The broker said that the stock proved a haven for fund managers in the recessions of the early eighties and early nineties, and it proving similarly resilient in the current recession.The broker said that the company's outlook statement was positive, and if the business can grow earnings and dividend per share by 7% 'then the prospective [estimated] PE [price/earnings ratio] is 13.5x and the prospective yield is 2.7%.'FinnCap rates the shares as a 'strong hold'. Nomura Securities was disappointed with interim results from no frills airline Ryanair and has lowered its earnings forecasts to reflect a decline in ancillary revenues per passenger across the rest of the year.The broker has retained its 'buy' rating on the stock and sees the 'key to the medium-term share price story' is whether the company decided to chase growth.'We believe the company can generate useful returns over the medium term, especially if capacity growth plans slow. We believe following the fall in the shares, there is an attractive entry point to this medium term story, acknowledging the tough nearer term trading environment,' said Nomura analyst Andrew Evans.The broker has a target price of €3.50 for the stock.