UK MARKET TALK ROUNDUP: BROKERS COMMENTS

14th Jul 2010 07:18

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] 0618 GMT [Dow Jones] UBS downgrades Pennon Group (PNN.LN) to neutral from buy following a period of outperformance. Year-to-date, Pennon has given a total return of 10%, outperforming the FTSE 100 and the sector by 10% and 21% respectively, notes UBS. In general, with inflation rebounding, credit conditions improving and regulatory visibility to '15, UBS sees all the UK water stocks as potential M&A targets. However, excluding M&A, it sees little fundamental upside in Pennon. Maintains 565p price target. Shares closed Tuesday at 582.5p. ([email protected]) 0618 GMT [Dow Jones] Citigroup initiates Compass Group (CPG.LN) at buy with 630p target. Says the shares are up by 15% in 2010 on strong trading momentum but at the same time are at about a 7%-8% discount to its historical P/E average. Says Compass' cost-saving program has delivered over 200bps of margin expansion over three years to 6.5% in FY '09. Notes that another 200bps of margin improvement to 8.5% is flagged over the longer term and early execution would lead to tangible EPS upgrades. Shares closed Tuesday at 553p. ([email protected]) 0617 GMT [Dow Jones] HSBC upgrades Game Group (GMG.LN) to neutral from underweight on valuation grounds. Says: "Recent share price performance suggests market pessimism over risk to FY out-turn is factored into the price." Has 75p price target on the stock. Shares closed Tuesday at 68p. ([email protected]) 0611 GMT [Dow Jones] Morgan Stanley downgrades BAE Systems (BA.LN) to equalweight from overweight and cuts target price to 375p from 450p. The brokerage says sustained pressure on defence budgets prompts it to reassess its defence ratings. "While we continue to see significant upside to intrinsic value, escalating concern over budget cuts means defence will likely continue to trade at a significant discount." Shares closed Tuesday at 329p. ([email protected]) Contact us in London. +44-20-7842-9288 [email protected] (END) Dow Jones Newswires July 14, 2010 02:18 ET (06:18 GMT)