Broker tips: Standard Chartered, Greene King, Game

2nd Jul 2009 13:20

Though it continues to favour fellow Asia-focused bank HSBC, UBS has moved from a negative to a neutral stance on Standard Chartered, and sees the shares becoming becalmed in the near future.UBS has upped its price target from £10 to £11.40, some 50p below Standard Chartered's current share price. The Swiss bank is projecting Standard to make pre-tax profit of $2.5bn at the interim stage this year, nearly four times what it was making four years ago, as it benefits from having maintained its capital and funding discipline prior to the credit crunch.UBS believes the interim results will represent a near term earnings peak for Standard. It prefers HSBC, which is likely to benefit from the same trends as Standard Chartered but which is valued well below its historical average. Regional brewer and pub chain owner Greene King may have upset elements of the real ale crowd through its penchant for buying up rivals and closing their breweries, but the investment analyst community seems to be raising a glass to the company's strategy.KBC Peel Hunt has upgraded the stock from "hold" to "buy", with a price target of 470p, after the group's final results came in ahead of expectations."We believe Greene King is good value at 8.7x prospective EBITDA [earnings before interest, tax, depreciation and amortisation]. This is a quality company, strategically focused and now with firepower to take advantage of developing opportunities," said KBC analyst Paul Hickman, who expects to upgrade his earnings forecasts for the current year by around 3% to give profit before tax of £124m and earnings per share (EPS) of 43.2p.Charles Stanley is also a buyer, and has rebased its price target to 525.3p to reflect the company's 3 for 5 rights issue of shares at 270p."The group continues to report encouraging trading indications from the managed houses, but the emphasis of now is on improving life amongst the poor quality tenancies," the broker said.Results from computer gaming retailer Game Group disappointed on Thursday morning, while the group's prospects have divided brokers KBC Peel Hunt and Charles Stanley.Charles Stanley has initiated coverage with a "buy" recommendation and a price target of 170p, though it acknowledges that the retailer is "vulnerable to the likely slowdown in industry sales" as gamers await the next generation of gaming consoles.Charles Stanley has taken the industry cycle into account when calculating its price target by applying a 50% discount to the retail sector's forward price/earnings multiple of 13. "A key bull argument is that the current product cycle is different from previous cycles because all three key hardware manufacturers have successful consoles with products attracting a broader consumer base than in prior cycles. One key risk of this steep adoption curve is that it simply leads to a "saturation" point quicker than prior cycles, which in turn, could lead to an equally steep fall on the other side of the 'growth and contraction' cycle that has historically characterised prior console generations," Charles Stanley analyst Peter Smedley observed.KBC Peel Hunt has retained its "sell" recommendation and 100p price target and expects to downgrade its earnings estimates following the group's trading update."We believe absolute gross profit generation peaked in FY2009 and expect to see profit generation decline over a number of years until further major hardware releases, reflecting endemic price deflation and greater competition as product enjoys free supply," KBC analyst John Stevenson said, adding that the growth in popularity of online gaming and digital delivery of software remains a long term threat to Game's business model.