UK MARKET TALK ROUNDUP: BROKERS COMMENTS -2-

7th Jul 2010 11:22

0826 GMT [Dow Jones] Panmure Gordon raises Carillion (CLLN.LN) price target to 350p from 300p following the company's 1H update. Says trading is in line with expectations, but the group continues to make good progress in Support Services amid diversification away from its traditional UK construction base. "It retains good revenue visibility, a sound balance sheet and has an attractive valuation." Keeps the stock at buy. Shares -1.4% at 309p. ([email protected]) 0820 GMT [Dow Jones] Daniel Stewart initiates coverage of International Ferro Metals (IFL.LN) with a buy rating and 87p price target. Sees 'the company returning to profit this year, supported by improving ferrochrome prices." Says ferrochrome market "is rapidly returning to the point where demand exceeds supply - this is reflected by recent strong price appreciation," but "the positive impact of this on International Ferro Metals has not yet been recognized by the market." Adds the South African-based miner "offers a focused investment opportunity." Shares -1.8% at 27.5p. ([email protected]) 0816 GMT [Dow Jones] WestLB upgrades Sage Group (SGE.LN) to buy from add, "to reflect greater mathematical upside but also to highlight the fact that we believe this company to be defensive and cheap." Notes cash flow has been excellent, with a free cash flow yield of nearly 10%. Says with a change of CEO on the way, the future could evolve in a number of ways, one of which is that Sage could very easily attract speculative interest. "This is the kind of share to buy in a weak stock market." Has 280p price target. Shares -0.4% at 227p. ([email protected]) 0758 GMT [Dow Jones]--3i Group's (III.LN) statement for its first fiscal quarter is reassuring, but unlikely to cause anyone to change views or estimates, says Merrill Lynch. Keeps a buy recommendation. The private equity firm's portfolio companies continue to perform well overall, according to chief executive Michael Queen, and although the debt level is up slightly from year end this is as we would expect as the investment environment improves, Merrill Lynch adds. "Overall, we would view this statement as a minor positive, as the market has been in worry mode recently, and this update suggests that 3i's portfolio, at least, is in decent shape," says Merrill Lynch. Keeps at buy, with a target price of 360p. Shares -1.2% at 260p, in a negative market. (MTC) 0700 GMT [Dow Jones] Marks & Spencer's (MKS.LN) 1Q trading update is good, says Arden Partners. Says the general merchandise outcome is encouraging, given that the weak Debenhams (DEB.LN) sales figures last week implied the clothing market in June may have been a bit disappointing. Adds that the problem for M&S is more to do with costs than sales. Keeps the stock at reduce. Shares closed Tuesday at 353p. ([email protected]) 0658 GMT [Dow Jones] Smiths Group's (SMIN.LN) new funding plan for its two major U.K. pension schemes is "slightly novel" because it allows Smiths keep its contributions in an escrow account, which means it will not immediately see money taken off its balance sheet, says Arden Partners analyst Chris Thomas. Thomas notes, though, that Smiths could see "quite significant" cash outflows if its pensions schemes' funding positions show deficits in the near future. But says it's too early to say how the pensions schemes' funding position will move in the next few years, but "one thing going against them (Smiths) is the longevity assumption (on pension members)." Keeps neutral rating. Shares closed at 1077p Tuesday. ([email protected]) 0658 GMT [Dow Jones] Barclays Capital initiates coverage of Meggitt (MGGT.LN), with an equalweight rating and a 350p price target. Says while it is positive over the potential for civil aerospace aftermarket growth, this was only 28% of '09 revenues and the 45% of revenues from defense is likely to be relatively slow growth. Says a civil aerospace upturn could be partially offset by slowing defense spending, and says this may drag on Meggitt's multiple. Says the target price implies 16% upside. Shares closed Tuesday at 308p. ([email protected]) 0655 GMT [Dow Jones] Royal Bank of Scotland initiates coverage of UK general retailers, with a cautious stance. Expects the sector to come under consumer spending, cost and margin pressure, as austerity measures dampen confidence. Starts Home Retail Group (HOME.LN) at hold with 214p price target, saying UK macro headwinds for both Argos and Homebase are negative. Start Next (NXT.LN) at hold with 1989p price target, saying that while cash flow, dividend growth and share buybacks are supportive, two consecutive years of EPS downside are likely. Starts Marks & Spencer (MKS.LN) at sell with 333p price target, citing declining returns, greater competition and a stretched balance sheet. Starts Kingfisher (KGF.LN) at buy with 208p price target, saying it's the highest-quality restructuring play within RBS's UK retail universe. ([email protected]) Contact us in London. +44-20-7842-9288 [email protected] (END) Dow Jones Newswires July 07, 2010 06:22 ET (10:22 GMT)