Broker tips: Unilever, Standard Chartered, 888

5th Aug 2010 13:49

Charles Stanley believes investors are increasingly viewing an investment in Unilever as a proxy for exposure to emerging markets, from which around half of the household goods giant's sales are derived.As such, the 8.2% underlying sales increase by Asia/Africa/Central & Eastern Europe against expectations for 6.2% growth was welcome news. The region's volumes increased by a better than expected 11.5% more than offsetting pricing of -2.9% to ensure that products remained competitive, the broker notes.The market has opted to focus on the cautious outlook statement, however."The negative share price reaction to these results reflects a downbeat outlook statement within which Unilever anticipates rising commodity costs, sluggish economic growth across developed economies and an increase in competitive activity, which will limit the scope for product price increases. In such circumstances the continued commitment to delivering profitable volume growth, a sustained improvement in operating margins and cash flows may be hard to achieve. That said, we recognise the internal revolution headed by Mr Paul Polman and believe that tough targets are achievable going forward," said Jeremy Batstone-Carr, head of research at Charles Stanley.The broker has reiterated its "accumulate" recommendation for the stock and notes that it trades at a discount to rivals Danone and Nestle.Asia-focused bank Standard Chartered may not be a recovery story but it is still well placed to continue growth momentum, reckons Nomura Securities, which has reiterated its recommendation to buy the shares.The bank's first half results were broadly in line with market consensus and slightly ahead of Nomura's expectations, and although it did not top forecasts the group continues to grow profits."With the 8% negative jaws reported at the first half stage likely to narrow going forward, pre-provision profit growth is likely to resume in our view. Revenue growth over the medium term will continue to benefit from the group's footprint in Asia and other emerging markets and is likely to outperform developed market peers and HSBC in our view. Valuations, while inline with local peers, reflect this growth profile with the shares trading at 12.7x 2011 EPS [earning per share] and 2.6x 2010 tangible book [value]," said Nomura analyst Raul Sinha.The broker had modestly revised upwards its full year earnings estimates to reflect lower impairments.Panmure Gordon is keeping the faith with the investment appeal of online gaming firm 888 Holdings after this week's second quarter update, but in recognition of the challenging environment in which the group is operating it has cut its target price.Top-line performance in the second quarter was stronger than Panmure Gordon was expecting, albeit at the expense of some margin, but the broker acknowledges that trading will remain tough over the next 18 months. As a consequence, the company has cut its 2010 estimate of earnings before interest, tax, depreciation and amortisation (EBITDA) by just under a third to $27.3m and its 2011 EBITDA forecast by 30% to $30.5m.The price target is cut to 62p from 80p, while the "buy" recommendation is maintained."Clearly the group's profit trajectory going forward will depend on the pace and nature of local market regulation. For example, while 888 appears well placed to benefit from the opening of the Italian casino market, the French poker and sports betting markets offer considerably less opportunity. However, in our view, 888 remains well placed should the US market regulate and is hopeful of hearing back from the Nevada Gaming Commission by the year-end regarding its licensing agreement with Harrah's. It also appears to have recommenced discussions with the US Department of Justice, although there is nothing material to report at this stage," the broker reports.