Broker tips: Reed Elsevier, Liberty, Man Group

31st Jul 2009 11:59

Shares in publishing group Reed Elsevier recovered a little on Friday morning after the battering they took on Thursday following the company's disappointing results.Broker Nomura identified two aspects of the results which unsettled investors: the £824m dilutive share placing, and the 7% decline in organic revenue."The net result is a 17% reduction in our 2010 EPS forecast, which leaves the shares on a 2010 PE multiple of 10X. Although not expensive relative to history, the multiple reflects the realization that Reed's portfolio contains some highly cyclical components, and the possibility that the rate of investment may have to be accelerated in order to restore organic growth," the broker's analyst Colin Tennant asserts. Property group Liberty faces a bumpy ride into 2010, reckons Singer Capital Markets, which is reviewing its rating on the stock after Friday morning's trading update.The retail property specialist saw headline shopping centre occupancy improve to 96.3% at the end of June from 95.4% at the end of March and 93.6% at the end of 2008.Singer notes, however, that the majority of the re-lettings have been short term lettings of less than five years and opined that it is "unclear how the valuers will handle this in the future if even this type of letting becomes difficult, e.g. danger of blighting the highest zone As.""Shopping centre estimated rental values fell by 3.5% in h1 [the first half], and we think the retail environment could become tougher into 2010 as pressure is reapplied to the consumer after a period of relative energy/commodity deflation and mortgage cost reductions," Singer analyst Daniel Horwood said."The market range for Cycle Low NAV [net asset value] is wide (c 350-420), and we prefer the upper-middle of this range. Taking the simple average 385p the shares trade on a premium of 13% - which we are uncomfortable with especially considering retailer risks (i.e. Liberty's tenant risks) into 2010," the broker concludes.Broker KBC Peel Hunt is bearish on the stock, rating the shares a "sell"."With the shares having rallied some 14% in the last three weeks and further work needed on the lettings side as well as in reducing net borrowings we retain our Sell recommendation," KBC said.The prospect of the US Commodity Futures Trading Commission (CFTC) tightening up rules on position limits and hedging exemptions is bad news for hedge fund manager Man Group, UBS reckons.Man's flagship AHL fund is heavily invested in commodities, and any attempt to reduce volatility in the commodities market could cramp its style, UBS argues.'This is negative for Man as its key fund, AHL, has 30% of its portfolio in commodities,' UBS said in a research note in which it downgraded the stock from "neutral" to "sell". UBS has left its price target of 245p unchanged.Gary Gensler, CFTC chairman, has said that the US should "seriously consider" strict position limits on energy markets in order to deter speculators."This hearing is an opportunity to determine how speculative position limits could be used to address excessive speculation, not how we can eliminate speculation," Gensler said at a CFTC meeting earlier this week.