UK MARKET TALK ROUNDUP: BROKERS COMMENTS -2-

7th Jul 2010 12:46

1022 GMT [Dow Jones] 2H'10 is likely to be a bumper six months for the E&P sector, given the relative dearth in 1H, says UBS. All European E&Ps in its coverage universe are drilling important prospects in 2H, UBS notes. It says M&A is showing signs of returning with vigour, noting Afren's (AFR.LN) all-share takeover of Black Marlin Energy (BLM.V) and KNOC's recently announced preliminary approach to Dana Petroleum (DNX.LN). UBS says the E&P sector outperformed wider oils and the market in June. Tullow (TLW.LN) remains top pick, with a buy rating and 1450p target. UBS also likes Premier Oil (PMO.LN) and Afren, which it rates buy with 1560p and 125p targets, respectively. ([email protected]) 0837 GMT [Dow Jones] Investec Securities lifts its full-year pretax profit forecast for Marks & Spencer (MKS.LN) to GBP660 million from GBP640 million following the retailer's first-quarter trading update. The figure is below consensus forecasts of around GBP700 million. "We are happy to stay below consensus given M&S's historical trading volatility when consumers are under pressure," the broker says. Says the update was ahead of expectations, but adds continuing top line momentum is unlikely without additional margin investment. Has a hold rating and 355p target price. Shares -2.2% at 345p. ([email protected]) 0833 GMT [Dow Jones] 3i Group (III.LN) is well placed to make interesting new investments, says JPMorgan Cazenove analyst Christopher Brown following the firm's statement for its first fiscal quarter. In addition to the "good pipeline of investment opportunities" Brown also said that 3i may also take advantage of the high prices being paid for buyouts by other private equity firms and sell-off some of its assets. Shares are trading at a 23% discount to JPMorgan Cazenove's current estimate for NAV in September and says there is still "plenty of potential value to be unlocked from 3i's portfolio." Keeps stock at overweight. Shares down 1% at 261p. ([email protected]) 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]) Contact us in London. +44-20-7842-9288 [email protected] (END) Dow Jones Newswires July 07, 2010 07:46 ET (11:46 GMT)