UK MARKET TALK ROUNDUP: BROKERS COMMENTS

27th Jul 2010 09:39

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] 0839 GMT [Dow Jones] Provident Financial's (PFG.LN) GBP54 million pretax profit for the first half exceeds expectations says KBC Peel Hunt. It was helped by higher contribution from Vanquis Bank says says KBC. "While growth remains moderate we consider that management are pursuing the correct strategy that will allow the group to take advantage of what we consider to be a structural growth opportunity, driven by the absence of credible competition in the subprime market, when economic conditions are right," says KBC. It adds that Provident maintains its cautious approach to lending and a robust balance sheet. Buy rating, 975p target. Shares -7.9% at 812p. ([email protected]) 0802 GMT [Dow Jones] Xstrata (XTA.LN) first half output report "doesn't appear to contain material divisional disappointments," unlike BHP (BHP) and Rio Tinto (RTP), says Liberum Capital. On the positive side, coking coal output is up 73% and the switch from thermal coal output to higher margin semi-soft output saw semi-soft jump 50%, the bank adds. Meanwhile copper production only fell 3% in the first half of the year compared to an 18% drop at Rio Tinto and 5% drop at BHP, Liberum says. The miner should also benefit from higher coking coal prices, the bank adds. Liberum has a buy rating on the stock. Xstrata -0.2% at 1035p. ([email protected]) 0731 GMT [Dow Jones] BP (BP) is moving aggressively to position itself for the tough times ahead, says Richard Hunter, Head of UK Equities at Hargreaves Lansdown Stockbrokers, while significant challenges remain. "The triple-pronged approach of increased provisions, asset sales and a new CEO should be a potent mix in forming a strong future foundation." The underlying 2Q trading performance is robust with a significant improvement having been made on a like-for-like basis. Shares are -0.1% at 416p and the unknown costs and timing of litigation will continue to be a headwind on further price appreciation, adds Hunter. ([email protected]) 0719 GMT [Dow Jones] Morgan Stanley cuts Aquarius Platinum (AQP.AU) price target to 462p from 493p. Says new safety norms for mechanised mines have created uncertainty over the operating parameters at Aquarius's Marikana and Kroondal mines. This follows new regulations by South African regulators intended to improve safety standards in the country's platinum mines. "Ambiguity on initial orders, leading to market fears of a near-term production halt at non-compliant mines, has been clarified, but market confidence in the cost and volume parameters remains low." Keeps the stock at overweight. Shares +2.2% at 285p. ([email protected]) 0707 GMT [Dow Jones] Bernstein Research lifts Pearson (PSON.LN) target to 1275p from 1050p, and keeps an outperform rating. Says a "combination of market share gains driven by superior scale and relentless focus on the elements of the portfolio which afford the best opportunity for growth means that the company is now on a trajectory for steady upgrades in performance." Notes share gains across Pearson, most significantly in Education, have helped produce record first half results. Shares +0.7% at 1036p. ([email protected]) 0702 GMT [Dow Jones] Tomkins (TOMK.LN) has agreed to be acquired by an investment vehicle established by Canadian private-equity firm Onex Corp. and the Canada Pension Plan Investment Board for about GBP2.89B. "With any other party likely to be far behind in terms of due diligence, 325p a fair price in our view," says Arden Partners. It adds that with "no likely industrial buyer capable of offering greater synergies, we do not see any counter bid as likely and would look to sell shares over 320p." Says the acquisition is 325p through a scheme of arrangement which is expected to become effective towards the end of September. Shares closed at 308p. ([email protected]) 0655 GMT [Dow Jones] African Barrick Gold's (ABG.LN) 2Q results were not as good as expected, as quarter on quarter production was only slightly higher, costs were up and earnings were down, says Numis analyst Cailey Barker. "Not a great quarter from them." Comments the company appears to be making progress with controlling costs and increasing production "but slower than expected." Says he will retain his add recommendation, but may lower his target from the current one of 685p. African Barrick Gold shares closed Monday at 550p. ([email protected]) 0653 GMT [Dow Jones] BP (BP) takes a hefty charge, replaces its CEO and announces a $30B disposal program, doing everything it can to clean the slate following the Gulf of Mexico oil spill, says Panmure Gordon analyst Peter Hitchens. Still, it will be a long time before it rebuilds its reputation. Adds planned disposals should give the company "more than enough leeway to cope with any unforeseen event." Has a buy recommendation and 600p 12-month target price. Shares closed Monday at 417p. ([email protected]) 0649 GMT [Dow Jones] ARM Holdings' (ARM.LN) 2Q results look well ahead of consensus and KBC Peel Hunt's expectations, the brokerage says. It notes pretax profit of GBP43.5M and EPS of 2.34p versus its own estimate of GBP34.3M and 1.87p and consensus of GBP33.5M and 1.83p. "Despite these good results, we see the recent run as overdone on smartphone growth that was already priced-in." KBC Peel currently has a sell rating and a 280p target. Shares closed Monday at 346p. ([email protected]) 0645 GMT [Dow Jones] African Barrick Gold's (ABG.LN) second quarter results and reduction of its 2010 production guidance are disappointing, although partially expected, says Canaccord analyst Nicholas Chalmers. Says African Barrick's 2Q output of 179,113 troy ounces was below Canaccord's expectations, and the company raised its cash costs expected for the year even as it lowered production target. "It's a little bit disappointing." However, Chalmers adds the company's shares remain cheap relative to its peer Randgold Resources (RRS.LN). Has a buy recommendation, with a target price of 720p. African Barrick Gold shares closed Monday at 550p. ([email protected]) 0642 GMT [Dow Jones] BP (BP) changes its management and shifts strategic direction in moves that should lead to "a positive trading outlook for the company in the medium term," says ING analyst Jason Kenney. Sees asset disposal program of $30B over 18 months as indicative of the quality of the company's portfolio. And expects BP to rebuild its credibility with the assets it retains. "I don't see them being kicked out of the U.S." Has a buy recommendation and a 12-month to 3-year price target of 712p. Shares closed Monday at 417p. ([email protected]) 0642 GMT [Dow Jones] Morgan Stanley raises Tullow Oil (TLW.LN) price target to 1550p from 1500p following the announcement of a significant new find offshore Ghana. Says the find should remind investors that the exploration story is far from over at Tullow. "Newsflow in the coming weeks should be supportive in our opinion and there should be further enthusiasm as the Ghana campaign moves on to drill the Onyina prospect." Maintains overweight rating on the stock. Shares closed Monday at 1239p. ([email protected]) Contact us in London. +44-20-7842-9288 [email protected] (END) Dow Jones Newswires July 27, 2010 04:39 ET (08:39 GMT)