Broker tips: Reed Elsevier, BHP Billiton, Lloyds Banking

17th Feb 2011 13:02

BarCap has retained its 'underweight' stance on business and academic publisher Reed Elsevier, despite a healthy set of full-year results and a reasonable outlook for 2011.The group reported revenues of £6.06bn, versus consensus of £5.82bn, as underlying growth improved to 2% in 2010, from a fall of 6% in 2009. However, unlike its media peers, Reed's operating fell by 20 basis points year-on-year.Reed may also underperform rivals more highly geared to the advertising market such as Daily Mail, ITV and United Business Media, the broker says.BHP Billiton's solid spending commitment over the next half-decade is applauded by Swiss broker UBS.BHP has spelt out a 5-year capital expenditure outlook consisting of investment in organic growth of at least $80bn. The expenditure, to be detailed in coming months, will be focused on iron ore, petroleum, base metals and coal, according to the broker.BHP reported an underlying first half net profit of $10.7bn, versus consensus of $10.3bn, and announced an increase in the share buyback programme to $10bn, from $4.2bn.UBS expects the miner to spend around $140bn cash by 2015 (average of $26bn/year), "a solid commitment given current elevated commodity prices, and likely to dampen M&A concerns."The broker keeps its 'buy', and ups the target price to 2,830p, from 2,700p. Lloyds Banking Group has the best exposure to recovery of traditional banking, without the overhang of a capital markets franchise, Nomura suggests.The Japanese broker estimates a group loss before non-operating items for 2010 of £959m, much improved on a loss of £12.4bn in 2009. Nomura also forecasts a much lower impairment charge of £14.25bn, compared with £24bn previously."We view Lloyds as offering the highest gearing to a recovery of traditional banking profitability in the UK, without the dilution from capital markets operations," says analyst Robert Law.While the broker does expect the pace of recovery of margins and impairments to slow after the rapid improvements in 2010, it says that the bank still supports an attractive normalised return on equity of 15% for 2012.Nomura's stance remains 'buy' with a price target 80p.