Broker tips: SAB Miller, Compass, British Land

26th Nov 2012 12:48

Analysts at broker Jefferies were this morning praising brewery group SAB Miller's interim results out last week. In particular, they highlighted how the company's higher innovation, better execution and increasing cost synergies gives them confidence on the company's future ability to deliver peer-beating compound annual growth rates in its earnings per share of 14%.In turn, they were of the opinion that the above underpins a premium valuation rating of 17 times the company's earnings (versus peers trading at approximately 15 times).For all of the above reasons they decided to reiterate their buy recommendation on the shares and increase their price target to 3,200p.For analysts at Nomura Compass Group's latest fiscal year results - which showed an 11% increase in earnings per share - encapsulated the key attractions of the investment case. These were strong turnover growth (5.4%), excellent cash flow conversion and continued margin expansion (+8bp).Interestingly, and as regards the company's £400m buyback, the broker remarked: "Rather than welcoming the extended buyback per se, we believe it acts as a useful reminder of the free cash-flow generation [of the company] and disciplined approach to Mergers&Acquisitions (medium-sized deals at an average enterprise value/earnings before interest and taxes ratio of 10.4). As regards the weak trading conditions expected in Europe they commented that: "This remains the greatest area of risk, but we believe the downturn is being well navigated by the newly-appointed management." Nomura raised its price target on the shares of the company to 832p from 800p before-hand, while reiterating its buy stance. Analysts at UBS today issued an upbeat note on shares of British Land so as to reflect the company's lower risk profile and growing earnings potential. Hence, they indicated that; "Historically, we have been concerned about British Land's ageing portfolio. However, although the company's lease lengths have shortened, the company has been turning these from a threat into an opportunity. We (...) note management's success in potentially timing the lease expiries in harmony with the delivery of new space."UBS also saw developments adding up to £71m of annual rent, although medium term NAV growth is forecast to be driven more by improving rental values, particularly from fiscal year 2015 onwards. There is also reversion to be captured from the existing portfolio from rent reviews, index-linked leases, and letting up vacancy, they added. Furthermore, British Land's average cost of debt is just 4.4% they pointed out, materially lower than its peers, whilst its marginal cost is approximately 1%. It also has £2.3bn of available facilities, giving it a competitive advantage in terms of speed of response to opportunities and minimising earnings dilution if those come with little rental income (e.g.: Clarges).UBS has raised its target price by 3.5% to 580p and its recommendation to buy from neutral.AB