Broker tips: RSA, Centrica, Hays

25th Feb 2010 13:40

RSA beat Panmure Gordon's forecast for profit at both the operating and pre-tax level and impressed the broker with a 7% hike in the final dividend.The insurer said operating profit fell 10% to £777m and pre-tax income dived 27% to £554m, but Panmure expected worse and likes 5% growth in UK motor rates."Trading at a mere 10.8x 2009 and 9.5x 2010 PE we view the shares as attractive," it said."The shares are also well supported by a strong dividend yield of 6.25%. Outlook is positive - buy." Investors have warmed to British Gas-owner Centrica following a good set of full-year results and indications that 2010 has started well.An 18% fall in pre-tax profits to £1.64bn reflected a change in the operating profit mix, with a shift from upstream to downstream, while the lower tax rate on downstream profits means earnings per share were flat at 21.7p, ahead of expectations."These are good results, though pretty much as expected," said Ambrian. "The continuing cold weather should have ensured a good start to 2010, with the key supply months being December, January and February.""Centrica continues to look well set in the UK energy supply market, with last year's two major upstream acquisitions underpinning its vertically integrated hedge position."Centrica remains one of the broker's favourite plays in the sector, meaning the 'buy' recommendation and 317p target price remain unchanged. Recruiter Hays may have to rethink its dividend policy and is a 'sell', suggests broker KBC Peel Hunt after a grim set of figures today.Profit slumped during the first half as companies remained more concerned with laying people off than taking them on. Profit before tax crashed dived to £3.4m in the six months to 31 December from £100.8m in 2008 and plunged 70% to £30.4m excluding a £27m OFT fine that is currently under appeal.KBC added the results were lower than expectations at the PBT level but in line at the Net Fee Income level, showing some more margin slippage. With uncertainty still surrounding the OFT fine and therefore the final dividend, the broker perfers rival SThree.