UK MARKET TALK ROUNDUP: BROKERS COMMENTS

7th Jul 2010 07:55

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] 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]) 0638 GMT [Dow Jones] Marks & Spencer's (MKS.LN) 1Q update reveals a good start to the new financial year, says KBC Peel Hunt. Notes like-for-like sales growth of 6% in general merchandise and 1.5% growth in food sales versus KBC's estimates of +3% and +1%, respectively. Says this is clearly a solid outcome for M&S, with market share gains in all areas of clothing. Still, KBC says its concerns for M&S stem from balance sheet constraints and lower levels of cash generation relative to its peers, such as Next (NXT.LN). Reiterates sell rating on M&S. Shares closed Tuesday at 353p. ([email protected]) 0624 GMT [Dow Jones] Marks & Spencer's (MKS.LN) 1Q update shows strong trading, says a trader. Says total UK retail like-for-like sales were up 3.6% vs consensus of +2.3%, while general merchandise sales are very strong at +6%, vs consensus of +3.7%. However, notes there is no margin comment and the outlook statement is cautious. Shares closed Tuesday at 353p. ([email protected]) 0613 GMT [Dow Jones] UBS cuts Shire Pharmaceuticals (SHP.LN) price target to 1450p from 1600p. Brokerage says although a survey suggests more upside for VPRIV, it makes no changes to its estimates as it awaits more visibility on Shire manufacturing capacity. "As the stock has lost momentum, we remove the 10% momentum premium we had added and decrease our price target." Maintains neutral rating on the stock. Shares closed Tuesday at 1386p. ([email protected]) 0612 GMT [Dow Jones] JPMorgan Cazenove downgrades International Personal Finance (IPF.LN) to underweight from neutral, citing currency headwinds. Believes the combination of weak operating currencies and higher funding costs will reduce consensus estimates, and investor sentiment will continue to be influenced by macroeconomic concerns. As a result, reckons the stock will underperform the sector. Still, says the stock's rating does not reflect the medium-term growth potential in the markets in which it operates. Adds the dividend remains well covered and expects modest growth at the interim stage. Shares closed Tuesday at 205p. ([email protected]) 0612 GMT [Dow Jones] UBS raises Homeserve (HSV.LN) price target to 2080p from 1900p. Says while 1H typically has a seasonally lower proportion of profits, there is significant underlying activity in the business. Notes new customer growth initiatives in the UK, the development of the Agbar partnership in Spain, the new presence in Italy, the closure/development of the National Grid acquisition, and the two new large affinity partnerships in the USA. Says strong relative performance during the market correction since mid-April has been underpinned by the positive international developments. However, given the recent strong share price performance, keeps at neutral. Shares closed Tuesday at 2076p. ([email protected]) 0602 GMT [Dow Jones] UBS downgrades Dana Petroleum (DNX.LN) to neutral from buy, but raises its price target to 1470p from 1300p following a bid approach from the South Korean national oil company, or KNOC. Says Dana's shares subsequently moved closer to a level reflecting a more full valuation. If the deal does not go through, UBS reckons Dana's share price could fall back to/below its prior target of 1300p. Does not expect a counterbid above the current indicated level. Adds it's basing its price target on a probability weighting, assuming a 50% chance the deal will take place. Shares closed Tuesday at 1453p. ([email protected]) 0559 GMT [Dow Jones] Charles Stanley initiates easyJet (EZJ.LN) at reduce with a 334p target. Says further expansion of the fleet will only create shareholder value if the new aircraft achieve a pretax profit per seat greater than ever achieved before. Says for this to succeed, a substantial number of factors must be achieved. These include the company to deliver its GBP190M cost reduction program as planned; for yields to rise and the recovery of asset utilization to '07 levels. Says the current share price implies success in getting margins up to a level never seen before and keeping them there. Therefore, the brokerage sees substantial downside risk. Shares closed Tuesday at 400p.([email protected]) Contact us in London. +44-20-7842-9288 [email protected] (END) Dow Jones Newswires July 07, 2010 02:55 ET (06:55 GMT)