Broker tips: Tullow, Morrisons, NCC

21st Jan 2010 12:44

Brokers are holding fire on updating their net asset valuations on Tullow Oil until they have more information on the Irish oil company's 'significant' oil and gas find at its Tweneboa-2 exploratory appraisal well in Ghana.'Although further appraisal is needed, today's news is positive for Tullow as it highlights, yet again, the prospectivity of their acreage in Ghana which has yielded one major discovery (Jubilee) and now potentially a second (Tweneboa),' said Cazenove analyst Jessica Saadat.The broker has an 'outperform' rating on Tullow, noting that although the shares trade at a premium to Cazenove's core net asset value (NAV) estimate of 545p, the calculation does not include any value for Tweneboa. Analyst Phil Corbett at Tullow's house broker, Royal Bank of Scotland (RBS), said that 'given relatively little is known about the Tweneboa structure, we believe its right to be realistic at this point and refrain from making large NAV upgrades,' though Corbett adds that there is 'little doubt that this is a significantly positive result for Tullow.'The company has a strong track record in the exploration field which RBS thinks justifies the significant premium over 'risked NAV' at which the company's shares currently trade. Supermarket chain Morrisons like for like sales growth over the Christmas period may have been the envy of rivals Tesco and Sainsbury but it was broadly in line with expectations, according to Charles Stanley.Morrisons left its full year guidance for profit before tax at £750m, which Charles Stanley said that, given the stronger than expected sales, 'implies there has been some investment in margin'.'The group has the strongest balance sheet in the sector (gearing c20%) and the highest proportion of freehold property (c87%). With the food retail trading environment expected to remain relatively benign and the valuation looking reasonable, we reiterate our Accumulate recommendation,' the broker said.IT security firm NCC delivered results that were ahead of expectations and the 17% hike in the interim dividend is a sign of the board's confidence for the remainder of the year, according to Altium Securities.The broker likes NCC's combination of 'high recurring revenues, organic growth and strong cash generation' and rates the shares a 'buy', with a 450p target price.KBC Peel Hunt is also a buyer, though it was less surprised than Altium by the results, which it described as 'in line'.'NCC Group is capable of maintaining strong organic growth with the potential to outperform our revenue and margin forecasts over the next two years,' KBC analyst Alex Jarvis said. 'Key upside factors may include the reintroduction of price rises when appropriate, increased verification sales, increased cross-selling and the achievement of the 20% margin target in the Assurance Testing division,' Jarvis added.The broker has upped its price target to 489p from 435p.