Broker tips: Telecity, Stagecoach, Antofagasta

26th Aug 2014 13:43

Telecity's shares slumped on Tuesday after announcing the departure of chief executive Michael Tobin who has been with the company for more than 10 years.Tobin will leave in October following a handover period on 31 October. It comes shortly after Eric Hageman was appointed chief financial officer to replace Brian McArthur-Muscroft who left in January.Liberum gave the stock a 'sell' rating after the news, saying there may be some concerns about changing the chief executive and chief financial officer in quick succession.However, the broker said the news is likely to be well received regardless."Mike has clearly been an impressive entrepreneur, but we believe that the board is right to question whether he has the rights skills to take the business forward as a large mid-cap business," Liberum said."We believe that Mike's departure will be well received as shareholders look for increased focus on return on capital and cash generation."We expect a positive reaction today. However, we remain concerned about the margin sustainability and cannot justify the current valuation of 4% 2015 estimated free cash flow yield, 17 times 2015 estimated price/earnings and 10 times 2015 estimated enterprise value/earnings before interest, tax, depreciation and amortisation."Panmure Gordon is advising investors to take a trip on Stagecoach after the transport group flagged higher revenue and said it was on track despite challenges.Stagecoach said on Tuesday that all its businesses lifted revenue in the last three months, particularly its London bus contract operation which achieved an increase of 14.4% as it secured new work."Although there are a number of challenges to increasing profit in the year ending 30 April 2015, overall current trading is satisfactory and we remain on course to meet our expectations for the year," it said in a trading update.Panmure said Stagecoach remains one of its preferred stocks in the transport sector."We retain our 'buy' recommendation and 400p target price," it said in a note.Despite largely in-line operating profits from Chilean copper miner Antofagasta broker Investec has reiterated its 'sell' recommendation on the shares of the company. In particular, analyst Marc Elliot highlights the fact the company has capital programmes ahead. Together with volatile commodity prices he does not expect the company to repeat the 142% pay-out ratio achieved at the end of fiscal year 2013. Nevertheless, and as he points out, the firm is working on various projects to cut costs. Those include the creation of an owner operator team rather than using contractors. In parallel, both the Antucoya and Los Pelambres projects are being expanded in a bid to take on harder ore and offset declining grades.Also on the negative side of things, the Chilean government is working on a tax reform - set to be passed at the end of September - which looks likely to take the total effective charge to 35%. Even so, Investec does not intend to make significant changes to its forecasts or price target, which are now under review.AB