UK MARKET TALK ROUNDUP: BROKERS COMMENTS

14th Jun 2010 10:05

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] 0905 GMT [Dow Jones] Exane BNP Paribas cuts Barclays (BARC.LN) price target to 380p from 400p. With extreme regulatory and political uncertainty ahead and as clarity on these may not be forthcoming for years, Barclays is unlikely to trade at any material premium to book. Also although Barclays Capital's revenues disappointed in 1Q, guidance on expenses and a sharp decline in impairments fully compensated for this. Despite downgrades for 2Q revenues, Exane says its EPS revisions are modest. As such, the sell-off to below historic tangible book value of 337p is "curious." Outperform recommendation. Shares +2.8% at 299.1p. ([email protected]) 0900 GMT [Dow Jones] ING cuts Eurasian Natural Resources (ENRC.LN) target price to 1000p from 1075p to reflect a reduction in the brokerage's ferrochrome and iron ore price assumptions. ING also factors in significant cost increases, as it now thinks both cash costs and depreciation are likely to be higher than previously forecast. At the same, ING cuts Kazakhmys (KAZ.LN) price target to 1400p from 1425p, noting it holds a 26% stake in ENRC. Keeps ENRC at hold and Kazakhmys at buy. ENRC shares +2.9% at 1058p, and Kazakhmys +3.5% at 1174p. ([email protected]) 0839 GMT [Dow Jones] Charles Stanley initiates coverage of homeware retailer Dunelm Group (DNLM.LN) with a buy rating. Says the recent fall of around 20% in its share price creates a compelling entry point for a competitively secure retailer. Says the retailer is poised to almost double sales in five years through organic growth, even if the U.K. emergency Budget triggers weak consumer demand. Starts coverage with a 500p target price. Shares -2.2% at 341p. ([email protected]) 0753 GMT [Dow Jones] Bank of America Merrill Lynch cuts Barclays (BARC.LN) price target to 420p from 500p. After a turbulent 2Q for investment banks and a disappointing 1H'10 for Barclays, the brokerage cuts its above-consensus '10 EPS forecast to 30.74p from 35.23p. Given the more uncertain macro and regulatory environment, BOA also cuts its '11 EPS estimate to 43.29p from 53.36p and its '12 EPS estimate to 59.23p from 67.69p. Still, says Barclays looks cheap and profitable this year, and remains a buy. Shares +1% at 294p. ([email protected]) 0703 GMT [Dow Jones] News that Carillion (CLLN.LN) has won a support services contract from BAA worth GBP50M is clearly good, but not a surprise, says Seymour Pierce. It notes the company already provides facilities management services at Heathrow and Carillion had previously announced there could be potential extensions of its current contracts. Reiterates buy recommendation and 380p target. Shares +1.7% at 334p. ([email protected]) 0657 GMT [Dow Jones] National Grid's (NG.LN) announcement of a take up of 94.2% of total number of shares offered to qualifying shareholders pursuant to the 2 for 5 rights issue announced May 20, 2010 is quite high, but not that surprising given the very large 44% rights discount, says an analyst. Around 58 million shares are being placed, "reasonably easily, but at a decent discount (10%) to the current share price," adds analyst. Shares closed at 499p. ([email protected]) 0656 GMT [Dow Jones] Weir Group's (WEIR.LN) acquistion of Malaysia-based Linatex "is clearly a complementary acquisition for the group but would appear to be earnings-dilutive in the current year," says Altium Securities. It notes the company's surprise update shows trading has been stronger than expected, particularly in the minerals division and SPM. Altium adds that orders continue to exceed expectations. It says the stock remains materially underpriced. Keeps at hold with 1139p target. Shares closed Friday at 951p. ([email protected]) 0654 GMT [Dow Jones] United Business Media's (UBM.LN) South American acquisitions increase its exposure to emerging markets and industries with strong growth prospects, says Altium Securities. "We remain optimistic following recent trading comments from the company that momentum is improving creating upside as the year develops," it says. "We see good scope for share price out performance." Reiterates its buy recommendation, and 655p target price. Shares closed Friday at 517p. ([email protected]) 0651 GMT [Dow Jones] Weir Group's (WEIR.LN) acquisition of the Linatex group of companies looks good, and is "just what we want to see," says a trader. Also notes the company's update, saying it continues to be optimistic on its outlook. Another trader notes Weir's aftermarket orders exceed expectations, adding there is a positive emerging trend in the original equipment orders. Expects profit in 2H '10 to be well ahead of 2H '09 profit in constant currency terms. Shares closed Friday at 951p. ([email protected]) 0640 GMT [Dow Jones] JPMorgan upgrades Drax (DRX.LN) to neutral from underweight and raises price target to 365p from 330p, reflecting the strong upward earnings pressure given the rally in UK gas and electricity prices over the last three months. While JPM is not convinced the rally is sustainable, its magnitude and duration mean it is hard to ignore, the brokerage says. "Provided there is sufficient market liquidity, Drax should be able to take advantage of the rally to increase its forward sales for '11 and '12." Shares closed Friday at 368p. ([email protected]) 0639 GMT [Dow Jones] HSBC initiates coverage of Cable & Wireless Communications (CWC.LN) with an overweight rating and 77p target price. The brokerage says the outlook for key markets is improving but the Caribbean market is still weak. Nevertheless, it adds that the company has a "sensible strategy combined with attractive dividend yield." Shares closed Friday at 56p. ([email protected]) 0631 GMT [Dow Jones] Morgan Stanley downgrades Lloyds Banking Group (LLOY.LN) to underweight from equalweight, and cuts its target price to 50p from 65p. Says Lloyds faces the biggest risk among UK banks of missing consensus beyond FY'10, given pressure on net interest margin, tepid GDP growth and industry funding strains. "Although many concerns are in the price at 1x 10E TNAV, Lloyds is a relative underweight as we see normalized returns close to cost of capital and our European Banks have 20%+ upside." Says Barclays (BARC.LN) is its top pick, with 37% to Morgan Stanley's new target price of 400p, from 425p. Has Barclays at overweight. Lloyds shares closed Friday at 54p, and Barclays at 291p. ([email protected]) Contact us in London. +44-20-7842-9288 [email protected] (END) Dow Jones Newswires June 14, 2010 05:05 ET (09:05 GMT)