Broker tips: Vodafone, BTG, Homeserve

25th May 2011 10:02

While Nomura leaves its target price for Vodafone at 210p, the broker downgrades the telecoms giant from 'buy' to 'neutral', saying that "customer lifetime value [is] heading in the wrong direction.""Despite the push on smartphones, European mobile momentum is heading south. Both O2 and KPN management have now admitted that the move to smartphones has not been positive for customer lifetime value. Despite Vodafone's protestations to the contrary, Vodafone is not immune to the sector's momentum," the broker said.Furthermore, the broker estimates that "tougher regulation alone (mobile termination rate cuts in the UK and Italy, data roaming caps across Europe) should reduce European revenue growth by at least 100 basis points in Vodafone's first half."Despite BTG swinging to a loss (on a pre-tax basis) during the year ended 31 March, Prime Markets suggests to 'buy' on the dips, as the specialist healthcare group is "better-placed than ever for growth.""BTG [has] undergone something of a transformation over the past seven-eight months, which has seen the group commence sales of it's own acute care products in the US and generate increased value from the partnered pipeline with AstraZeneca," said Prime Markets' head of sales Ben Timms."Significantly, BTG shares have risen since the end of March (year end), and although some holders will almost certainly be taking profits today, the outlook is excellent and there is a real sense that the restructured and enlarged BTG is better-placed than ever to deliver increased sales and profits," said Timms. The broker has a four-six week target price of 278p.UBS has hiked up its target price at home emergency repairs group Homeserve, after an "excellent operational performance" in the year ended 31 March.Revenue came in ahead of the broker's forecasts at £467.1m (UBS: £464m), representing a growth of 27%. Earnings per share (EPS) was 25.9p, above estimates of 25.1p."4% UK customer growth and an unchanged group retention rate of 83.6% are the highlights in our view. Profit disclosure...shows the company hitting its £6m US profit target and beating our expectations in France and Spain," UBS said.UBS raises its EPS estimates over the next few years by up to 2%, and increases the target price to 560p, from 510p. A 'buy' is retained.---BC