Broker tips: Unilever, HMV, Daily Mail

15th Jan 2010 13:11

Nomura fears that food and household goods giant Unilever faces increased competition from the likes of Procter and Gamble in 2010 and downgrades its rating on the stock to 'reduce' from 'buy.''We recommend taking profits,' Nomura says of Unilever, whose brands include Hellmann's mayonnaise and Persil washing powder.The Japanese broker is bearish on the overall European food sector, seeing no return to the 'halcyon phase' of 2003 to 2007.'Although we see some names benefitting from the continuing M&A wave in 2010, we see risk of disappointment in terms of consumer trends and margin progression.'Daily Mail & General Trust (DMGT) is the preferred newspaper play at UBS given its business-to-business exposure (c70% of profits) and attractive valuation.'With much of the business comprising later cycle assets and professional publishers typically lagging the earlier cycle names by 2-3 quarters, we believe we are likely to be at the inflexion point in earnings momentum for DMGT,' says the Swiss bank.'The company is of course also geared in to any better than expected 'V' shaped recovery given the aggressive cost cutting that has taken place.'The broker thinks DMGT is undervalued, trading on 11x annualised 2010E earnings, a discount to the professional publishers and a justified premium to UK newspapers.As a result, its rating goes up to 'buy' from 'neutral' and the price target jumps to 500p from 465p.Trinity Mirror is cut to 'neutral' from 'buy' with target dropped to 185p from 220p.HMV fell further today after Goldman Sachs took the music and books retailer HMV off its 'Conviction Buy' list.While the Waterstone's owner remains a 'buy', its price target is cut to 126p from 140p after the broker lowered pre-tax profit forecasts by 2% for 2010 and 3% for 2011. It now expects Waterstone's to lose £1m.The big problem is a lack of visibility, says Goldman. HMV isn't allowed to comment on profitability until May due to its bid for Mama Group.'This lack of visibility might prevent a near term re-rating,' it said. 'Downside risks to our view include further weakness in the book market, longer-term declines in the physical CD and DVD market and delays in the delivery of cost savings at Waterstone's.'HMV said Thursday that group like-for-like sales fell 1.2% in the five weeks to 2 January, although its core operation, the HMV CD and DVD chain in the UK and Ireland, saw like-for-like sales rise 2.2%.