Broker tips: Shell, 888, Hargreaves Lansdown

28th Apr 2010 13:10

First quarter results from Royal Dutch Shell were ahead of expectations, prompting Charles Stanley to upgrade the stock.The broker is now recommending its clients accumulate the stock, having previously rated the stock a "hold"."The first quarter results reflect the beginning of a more encouraging trend and overall, with a dividend yield of 5.6% and with cash flows set to improve markedly over the next two years we move our recommendation to Accumulate (last recommendation was Hold at 1917p on 23 April)," the broker announced."The 2009 cash flow from operations was $24bn which had to fund capital expenditure of $29bn and pay the annual dividend of $10.5bn. The cash flow guidance [for 2010] implies Shell should be able to fund capital expenditure and the dividend from cash flow rather than increasing debt by 2012, if not earlier," the broker concludes.In poker terms KBC Peel Hunt's position on 888 Holdings has moved from a 'bet' to a 'check' after the online gaming group's trading update on Wednesday morning.In KBC's view the first quarter figures were fine and in line with expectations, it is the second quarter performance that has prompted a downgrade from 'buy' to 'hold'."All product areas are under pressure, but poker in particular," KBC analyst Nick Batram notes. KBC's forecast of earnings before interest, tax, depreciation and amortisation (EBITDA) of $50.2m in 2010 is "significantly below consensus" and as such is still achievable in view of the significant cost cutting programme announced by 888.The broker has, however, reduced its target price from 123p to 98p.It is time to take profits at wealth management firm Hargreaves Lansdown, according to FinnCap, as the share price has looked frothy for a while."Proposals from the Financial Services Authority to prevent platforms paying rebates to consumers could undermine the business model of discount brokers, such as Hargreaves Lansdown," stockbroker FinnCap speculates. "Not being able to offer discounts undermines the model because it depends on their client getting the investments cheaper than if they went to the manager direct, so quite how that will pan out under the Retail Distribution Review (RDR) is uncertain. Although the RDR and platform proposals do not yet apply to discount brokers there is still a chance the FSA changes its mind or that execution-only services come under pressure to follow the example of the advisory sector," the broker continues."The HL price has looked generous for a while, so this issue could encourage some froth to be blown off. Take profits," is the FinnCap advice.