Broker tips: Road-builders, BAE, Morgan Sindall

10th Aug 2009 14:04

The government has been axing road schemes as it seeks to save money and more cuts are likely to follow, said Charles Stanley, which expects these cuts to have serious implications for road-building firms.Companies likely to feel the biggest impact include WS Atkins, Mouchel, Scott Wilson and RPS, according to the broker.Charles Stanley pointed to a letter from the Department of Transport to UK regions, which the broker says 'in essence warns that their road budgets are going to be cut.''We are sellers of almost all the consultant engineers,' the broker said.While noting that defence group BAE faces some disruption from reduced military spending in the US and UK, Charles Stanley expects the firm's diverse business base and wide geographical reach to serve it well.BAE 'continues to operate a well balance business,' with 31% of first half sales from Land & Armaments, 28% from Electronics Intelligence & Support, 24% from Programmes & Support and 16% from its international division International, the broker notes. Having fallen 12.2% over the past three months, the group is inexpensive, according to Charles Stanley.It keeps its 'buy' rating on the stock.KBC Peel Hunt thinks Morgan Sindall is still in good shape following this morning's interim results and keeps its 'hold' recommendation on the construction and regeneration group. Pre-tax profits fell by 28% from the previous year to £20.5m and the outlook remains challenging, but with net cash of £89m, the broker believes 'the company looks operationally and financially robust.''Despite the long-term value in this well managed group we maintain our HOLD recommendation and 500p target,' KBC Peel says.