UK MARKET TALK ROUNDUP: BROKERS COMMENTS

2nd Jul 2010 13:11

Broker comments in the UK today. Compiled by Dow Jones Newswires Markets Desk, [email protected] Contact us in London. +44-20-7842-9464 [email protected] 1211 GMT [Dow Jones] The fact the proposed Australian Resource Super Profits Tax is now to be replaced by a newly titled, and greatly watered down, Minerals Resources Rent tax is great news for the likes of Rio Tinto (RIO.LN), Xstrata (XTA.LN) and BHP Billiton (BLT.LN), says Ambrian. "We continue to recommend purchase of the mentioned miners, on the basis that when we get through this 'economic wobble' investors will find it hard to ignore the value these miners offer in terms of earnings and dividend growth over the next two years." Ambrian reckons EBIT exposures to the new tax would be roughly 70% for Rio, 40% for BHP Billiton and Xstrata and 10% for Anglo American (AAL.LN). Has 3500p price target on Anglo American, 1280p target on Xstrata, 1430p on BHP Billiton and 4700p on Rio Tinto. ([email protected]) 1150 GMT [Dow Jones] Morgan Stanley cuts Wellstream (WSM.LN) price target to 510p from 575p. Notes management has said that despite high tendering activity, the recovery is materializing more slowly than expected at the start of the year. In addition to the uncertain outlook for the offshore market, Wellstream is currently the second most expensive stock in European Oil Services, Morgan Stanley notes. As such, the brokerage sees better risk-reward trade-offs in other stocks. Keeps Wellstream at underweight. Shares +4% at 458p. ([email protected]) 1006 GMT [Dow Jones] Collins Stewart downgrades Brit Insurance (BRE.LN) to hold from buy after the insurer rejected a higher indicative bid of 1050p from Apollo Global Management compared to the previous 1000p bid. The brokerage also cuts its target price to 1000p from 1075p, saying it's surprised and disappointed that Brit does not consider 1050p a reasonable basis for discussions, especially in current market conditions. "We think there is a real risk now that Apollo walks away," says CS. "The lack of alternative bidders and the recent discount to book at which Brit has traded suggests that the stock would fall to around the 800p level were Apollo to walk away." Brit shares +3.9% at 922p. ([email protected]) 0903 GMT [Dow Jones] Investec downgrades Umeco (UMC.LN) to hold from buy, given the stock's recent strong performance. Notes it's up 12% since the company's results and 18% this month, relative to the FTSE All Share. Nevertheless, says the company's results were modestly ahead of expectations. Adds that after a number of years of relatively weak cash flow generation, the group now prioritizes it, resulting an improved performance. Has 415p price target on the stock. Shares +1.4% at 400p. ([email protected]) 0809 GMT [Dow Jones] The sale by InterContinental Hotels Group (IHG.LN) of its Buckhead Atlanta Hotel shows that the asset markets are tentatively recovering, says Citigroup. Says this bodes well for further disposals. Meanwhile, says the move by InterContinental is a good example of the "capital recycling strategy" employed by the group. Says having invested $110M in '04 to prove the brand in North America, the group has signed 21 new InterContinentals in that market. Says the group can now recycle that capital either behind another brand or return it to shareholders. Has InterContinental at buy. Shares are trading flat at 1046p. ([email protected]) 0657 GMT [Dow Jones] The replacement of the Australian resource super profits tax with another regime is clearly good news for all Australian mining companies, says Seymour Pierce. Says this is particularly good for non-ferrous producers such as Norseman Gold (NGL.LN), rated at buy. Says a policy transition group will now be created to consult with the industry and to advise the government on implementation of the scheme. Norseman closed on Thursday at 50p. ([email protected]) 0653 GMT [Dow Jones] Chloride Group's (CHLD.LN) decision to recommended a GBP997M takeover offer from Emerson Electric (EMR) is clearly positive for Chloride's shareholders albeit not a surprise after the withdrawal of Swiss engineer ABB Ltd (ABBN.VX), says an analyst. "Chloride's board has done very well to extract the right value for a premium company," he adds. Emerson all-cash offer for Chloride is at 375p plus 3.3p dividend, valuing the company at around GBP997M, which represents a 15% premium to ABB's 325p offer on June 8 and a 36% increase from its 275p offer on April 26, notes Numis Securities. Chloride shares closed at 370p. ([email protected]) 0645 GMT [Dow Jones] UBS upgrades Savills (SVS.LN) to buy from neutral. Says the shares have declined by 25% from their peak in mid-March. Thinks this represents an attractive entry point. Cuts the price target to 300p from 360p. Meanwhile, expects a strong 1H, reflecting a continuation of the momentum seen in 4Q '09. Says 1H activity has been particularly strong in Asia Pacific but there are signs of this cooling, and thinks this momentum will cool in 2H, particularly in China. Lifts '10 EPS forecast to 16.1p from 15.3p and '11 to 20p from 19.9p. Shares closed Thursday at 274.8p. ([email protected]) 0645 GMT [Dow Jones] Travis Perkins (TPK.LN) issues a positive trading update, says KBC Peel Hunt. Says merchanting or trade sales are up 5% like-for-like while retail sales are down 0.4% like-for-like. Says Travis is still "making hay" from the weakness of Wolseley (WOS.LN) and notes that there is still a high rate of failure amongst smaller independents. Says generally, the merchants are not especially vulnerable to the cuts in major public sector capital spending. Has no rating for Travis. Shares closed on Thursday at 709p. ([email protected]) 0631 GMT [Dow Jones] Citigroup upgrades Amlin (AML.LN) to buy from hold, and raises its target price to 470p from 420p. Says shares have been treading water of late, and while this represents a strong performance relative to the broader market, "it fails to capture the group's strategic progress and continued value creation." Adds with a strong capital position and virtually all assets held in cash and short-dated high quality bonds, Amlin shares are intrinsically low beta. "While they might underperform any relief-led macro rally, the company's entrenched focus on return on equity should ensure solid share performance," adds Citigroup. Shares closed at 381p. ([email protected]) 0622 GMT [Dow Jones] JPMorgan Cazenove lowers Great Portland Estates (GPOR.LN) to neutral from overweight. Says the company has outperformed UK property by 17% and peer Derwent London (DLN.LN) by 7% year-to-date. Says the downgrade to Great Portland's rating is based on relative valuation "while we believe that market rental growth expectations may have become too bullish." Still, says Great Portland is a quality company, with a strong development pipeline. Has a 350p target price. Shares closed at 283p. ([email protected]) 0558 GMT [Dow Jones] It is not surprising that Australian government's mining super-tax has not progressed in its original form, says a trader, considering the criticism directed towards it. Thinks now that the Australian government has negotiated a reduction in the headline rate to 30% from 40%, it will be interesting to see if the miners are able to pass the tax on. Says the muted reaction of the affected stocks in Australia, Friday, suggests that this still has a long way to play out. On Thursday, BHP Billiton (BLT.LN) closed at 1694.5p, Rio Tinto (RIO.LN) at 2904.5p. ([email protected]) Contact us in London. +44-20-7842-9288 [email protected] (END) Dow Jones Newswires July 02, 2010 08:11 ET (12:11 GMT)