Broker tips: Shire, Admiral, TSB, Provident Financial

9th Jul 2014 12:37

Following an improved offer of £51.15 for Shire from US suitor AbbVie, broker Panmure Gordon examined the case for whether a bid nearer £60 would be out of the question.Life sciences analyst Savvas Neophytou called the latest bid "inadequate" and said it would probably be rejected by Shire's board, who will be looking for nearer fair value, which he calculates to be in the region of £52.94-£57.76. "So a bid in excess of £55 will be required to engage Shire's board," he suggested.A "cautious outlook" from Admiral has prompted Canaccord Genuity to downgrade its rating for the insurer from 'hold' to 'sell', saying that it sees downside risks to its forecasts."The cautious outlook for margins beyond 2014 underlines the difficulty in improving margins even as pricing stabilises, as prior year reserve releases reduce," said Canaccord analysts Ben Cohen and Ming Zhu.Credit Suisse sees downside in the shares of TSB Banking Group as it started coverage of the stock with an 'underperform' rating.Analysts said they have initiated with a negative stance on the newly-listed Lloyds spin-off "despite the headline attraction of a simple and legacy-free way to tap into the profitability of UK retail banking". They believe that TSB's dependence on parent group Lloyds is overly engineered and complex, resulting in lower returns in the medium to long term.Berenberg has lowered its recommendation for financial services firm Provident Financial from 'buy' to 'hold', saying that "catalysts [have] played out for now" at the UK non-standard lender.The downgrade comes after a 40% jump in the share price so far in 2014. "We remain positive on PFG's long-term growth prospects, but on 15 times [estimated earnings for] 2015 we feel that valuation now better captures this upside.BC