Broker tips: RBS, Smith and Nephew, Ophir

3rd Aug 2012 11:12

Investec has reiterated its 'buy' recommendation and 300p target price for part-nationalised lender Royal Bank of Scotland after the group's in-line first-half results, saying that it expects a recovery in profitability from next year onwards."It's not all bad. While MPs and regulators focus their energies on sound-bites and gesture-politics, RBS management continues to make useful progress in terms of balance sheet repair," said analyst Ian Gordon.Gordon said that RBS is "more than capable of responding to any uptick in credit-worthy demand for finance," saying that it "remains a mystery as to why nationalisation might be considered practical or desirable.Jefferies has raised its target price for medical devices maker Smith and Nephew from 740p to 780p and reiterated its 'buy' rating for the stock, saying that the group's first-half results showed that progress is being made on its strategic priorities.The broker said that it is seeing the effects of cost savings in the previously "sacrosanct" orthopaedics division, a merger of divisions has been initiated without signs of disruptions. "We consider this encouraging for the longer-term initiatives to deliver innovation and greater share of sales from faster growing product areas and geographies."Ophir Energy's Cretaceous Papa well, offshore Tanzania, was a success, but results were smaller than pre-drill expectations, leading UBS to reduce its target price slightly on Friday."While we believe that additional drilling in 2012 in Tanzania and neighbouring blocks in Kenya should support the shares through 2012, we are more excited about subsalt drilling in Gabon. This should take place next year (Total/Cobalt drilling may de-risk this first). In a success case we see c80% upside to net asset value [NAV] and we think a de-risking brings Ophir into play as an M&A candidate."UBS's NAV forecasts has been reduced from 835p to 805p due to the smaller-than-expected discovery. With the price target being set at a 10% discount to NAV for "country risk", it comes down to 725p, from 740p previously. A 'buy' recommendation has been maintained on the stock.BC