Broker tips: Tate and Lyle, Halfords, FirstGroup

4th Oct 2012 12:02

Credit Suisse has raised its recommendation for sweeteners and food products group Tate and Lyle from 'neutral' to 'outperform' and raised its target price from 700p to 750p despite leaving its forecasts unchanged.Credit Suisse said: "Tate has spent a few years getting its house in order, disposing large tranches of the more cyclical/commodity earnings and investing behind the added-value operations (now 60% of profits versus 38% in 2007). Despite this the shares have seen no rating change, still trading 11-12x earnings."Perhaps the market requires evidence of growth to see this re-rating? Tate is investing for that right now. Certainly it looks to us that the business is in better shape and is being set up to deliver growth - there is rather more going on in the business than might be apparent from the P&L."Seymour Pierce has raised its target price for car and bike parts retailer Halfords from 300p to 340p and reiterated its 'buy' rating following the appointment of a new Chief Executive Officer (CEO) and better-than-expected trading in the second quarter.The broker said that the valuation remains undemanding - shares are trading at 9.3 times full-year earnings on new numbers - given the "profit recovery potential of the business".UBS has upgraded its rating for FirstGroup from 'sell' to 'neutral' following Wednesday's steep sell-off on the back of the failure to secure the West Coast franchise.The broker said that firm needs to up investment to improve long-term profitability and cash generation; this, along with the loss of cash inflows from West Coast means that there is an increased risk to the dividend. Meanwhile, the IAS 19 pension adjustment and UK Bus disposals are also highlighted as "headwinds".BC