Broker tips: Tesco, Provident Financial, Big Yellow

13th Jan 2011 13:15

Even though Tesco reported subdued sales in the UK, Nomura is pleased with the supermarket giant's international performance as it showed impressive growth.Like for like (LFL) sales in the UK for the six weeks to 8 January were up 0.6%, against expectations of flat to +2%. Tesco posted another strong outturn in its international portfolio, with constant-currency growth being 9.9%, consisting of a 10.8% and 8.7% rise in Asia and Europe respectively.One percentage point of lost sales clips the broker's UK profit forecasts for 2011 by £30m. Nevertheless, "resilient Christmas trading" sees Nomura retain its 'buy' rating and target price of 495p.However, financial services firm Matrix has given Tesco a 'sell' rating and says the results are "a big miss" as the group struggles in the face of more competition."Our key points are that the UK business is struggling in the face of much more organised competition, that it has consistently lost market share in the past three years, and that the overseas is loss making and a cash drain in half of its markets."Matrix remains a 'seller' of the stock, issuing a target price of 370p.Panmure Gordon says that even though Provident Financial shares have had a good run as of late, recent funding news means that there is further to go in the near-term for the sub-prime lender.The group announced Thursday it had secured a 10-year facility of £100m from its M&G Investments UK Companies Financing Fund. Consensus pre-tax profit for 2010 is £141m, and so the broker said that its forecasts of £138m will be nudged up around 4% as a result.A 'buy' is retained, along with a 980p target price, as the broker says "The business model affords good visibility over capital generation, underpinning our confidence in the dividend."Big Yellow's bid to concentrate on filling space and increasing occupancy has attracted brokers Peel Hunt and Matrix, as the self-storage group is expected to vastly expand its income as a resultOccupancy in the period was around 2% lower, but the group has reduced development in order to fill more space and increase occupancy. "This strategy is working and may lead to, over the medium term, a 40% increase in gross revenues and, at a minimum, a doubling in earnings," adds Churstain.Peel Hunt raises its target price from 424p to 438p, and is a 'buyer' of the stock.Matrix says while the current share price looks good value, "the real attraction lies, as we have highlighted before, in the potential growth in income as occupancy rises and the dividend grows," said analyst Miranda Cockburn."We see just over 12% upside to our target of 379p and our happy to retain our 'buy' rating," said Cockburn.