Broker tips: Unilever, Healthcare Locums, PureCircle

27th Sep 2010 13:21

The acquisition by Unilever of US-based Alberto Culver for $3.7bn in cash is a big deal, both in a literal and colloquial sense, according to Charles Stanley, which has reiterated its recommendation to accumulate shares in the consumer products giant.Jeremy Batstone-Carr, head of private client research at Charles Stanley, thinks the deal "invigorates Unilever's presence in North America" and will put the squeeze on its US rival Proctor & Gamble (P&G). Alberto Culver's best known products, the TRESemmé, Nexxus, VO5, St Ives and Simple brands, go up against P&G's Pantene, Herbal Essences, Head & Shoulders and Clairol products. "Alberto Culver propels Unilever to the world's leading manufacturer of hair conditioning products, No 2 in shampoo and No3 in styling," Batstone-Carr notes. "Personal care has performed strongly for Unilever of late, boosted by strong sales of Suave and Degree (shampoo and deodorant respectively) in the US and bolstered by the roll-out of a range of Dove for men products worldwide earlier in 2010," Batstone-Carr continued. "A decade ago the division accounted for c20% of group turnover, now it accounts for c.30% as its importance within the business has increased and significant positions have been achieved in key emerging markets, particularly those countries with fast-growing populations in excess of 100m people," Batstone-Carr said.Never mind the dividend, worry about the loss of capital, is the message coming from FinnCap regarding specialist health and social care business Healthcare Locums.The broker has switched from an "income buy" recommendation on the shares to a "sell" rating after disappointing interim results released on Monday morning that are likely to prompt FinnCap to lower its full-year forecasts."Interims show a reverse in profits and also challenging trading conditions, with NHS [National Health Service] managers showing caution pre and post the run-up to the Autumn spending review. International database [is] still growing well but UK profits under pressure as hospital conserve cash," said FinnCap analyst David Buxton."We see further weakness in the shares as numbers disappoint and therefore alter our rating to Sell," the broker said. Westhouse Securities has lowered its profit projections for PureCircle after the sugar-substitute producer's disappointing full-year results but remains a buyer of the shares."We have lowered our numbers and our price target reflecting the somewhat unpredictable growth trajectory but remain convinced about the medium-term viability and prospects for PureCircle," said Westhouse analyst Bruce Davidson.The broker is now predicting earnings before interest, tax, depreciation and amortization of $15.7m and profit before tax of $9.5m for the year to 30 June 2011, on revenue expected to be in the region of $70m.The new price target is 250p. The recommendation remains "buy".The broker said the company's fiscal 2010 numbers may have been disappointing when compared to expectations before the July interim management statement but should be accepted as part and parcel of a company with a pioneering product. "However, the progress towards widespread consumer acceptance of stevia in food and drink products, together with its adoption by major food and drink companies, seems substantial," opines Davidson."In terms of the bigger picture, all the infrastructure and investment is in place. It is now all about driving sales growth. This will increasingly come from consumer pull linked to food and beverage product launches across all categories," he added.