UK MARKET TALK ROUNDUP: BROKERS COMMENTS

9th Jul 2010 10:39

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] 0939 GMT [Dow Jones] BT Group's (BT.A.LN) new pay deal will cost around GBP50 million extra a year by 2013 and "could mean a slower and more expensive fibre build," Sanford Bernstein says. "The near-term implications are mixed. BT will be able to launch its Sky Sports offering but with competition increasing, BT's engineers will also be available for reconnections," Bernstein says. Marketperform rating, 135p target. Stock +2.4% at 139p. ([email protected]) 0939 GMT [Dow Jones] Citigroup trims Henderson Group (HGI.LN) price target to 150p from 158p, to adjust for the GBP3M pre-tax RidgeWorth deal costs and for significantly lower equity markets than it had assumed in its previous forecasts. However, "we still see the stock as an attractive play on rising markets with a growth profile that's not totally reliant on them." Keeps the stock at buy. Shares -0.2% at 125p. ([email protected]) 0923 GMT [Dow Jones] Royal Bank of Scotland raises Cobham (COB.LN) target to 280p from 220p. Expects FY '10 and '11 to be challenging, but still thinks that Cobham is capable of sustaining above-average long-term organic growth. Says this, combined with high returns, strong cash flow and the ability to enhance growth through bolt-on acquisitions will prompt success. Keeps buy recommendation. Shares -0.8% at 225p. ([email protected]) 0917 GMT [Dow Jones] BT Group's (BT.A.LN) new pay-deal with its biggest union has been well received by the market, with the stock +2.2% at 139p. "We think this is good news for BT and its shareholders," Collins Stewart analyst Morten Singleton says. Liberum Capital's Mark James reiterates "BT has much more flexibility to cut costs than some of its European peers," such as France Telecom (FTE.FR), where last year staff costs rose 6% versus BT's 10% year-on-year decline. ([email protected]) 0826 GMT [Dow Jones] Tesco's (TSCO.LN) reported decision to open a standalone clothing store in London's West End shopping district is logical as it is a concept worth trialing, Royal Bank of Scotland analyst Justin Scarborough says. "To leverage its brands such as F&F (formerly called Florence & Fred) and Cherokee it is worth trialing (the concept) and see if it works. Why not try it?" He adds that it "is quite big in the clothing market and has done well in terms of growth at the value-conscious end of the spectrum," he adds. Has a buy rating and 523p target price. Shares +0.1% at 394p. Tesco is unavailable for immediate comment. ([email protected]) 0826 GMT [Dow Jones] Macquarie Equities Research initiates coverage of DSG International (DSGI.LN) at outperform, with 38p price target. Says the current valuation is undemanding, trading at a 33% discount to historical P/E. Reckons the company is on track for strong revenue and margin recovery in the UK, and notes its Nordics business continues to take market share. "In addition, GBP150M in cost savings over the next three years should help fund investment in the company's pricing strategy and a further GBP20M of rent savings per annum may provide a buffer for margins." Shares +1.6% at 28p. ([email protected]) 0751 GMT [Dow Jones] William Morrison's (MRW.LN) trading performance in the second half of the fiscal year will pick up, Arden Partners analyst Nick Bubb says. It "has been under pressure because of flat like-for-like trading across the industry, but we still think that the second half will pick up." Bubb also says that investors will be impressed with Chief Executive Dalton Phillips when he is unveiled for the first time at the interims on Sept. 9. Shares +0.4% at 282p. ([email protected]) 0728 GMT [Dow Jones] Credit Suisse upgrades Intertek (ITRK.LN) to outperform from neutral and target to 1800p from 1600p. Notes strengthening market indicators, recent acquisitions, and better-than-expected growth and margin guidance at the 4 month interim statement. Reckons the market underestimates Intertek's growth potential over the medium term. Says this creates the potential for earnings upgrades and multiple expansion to drive the stock. Notes Intertek trades at greater-than-average discounts to peers, despite more robust growth in the recent downturn and greater growth potential in the medium term. Shares +0.6% at 1585p. ([email protected]) 0712 GMT [Dow Jones] Citigroup downgrades National Grid (NG.LN) to hold from buy and target to 500p from 611p. Says now the dust has settled on the surprise GBP3.2B rights issue, three issues will determine the company's future: "the UK capex surge, how the capex/dividend is funded, and the likely strategic review of National Grid's US operations." Notes the new UK government seems committed to the environmental targets it inherited. In response, National Grid has upped its capex, Citi says. Adds that unless government policy changes, the capex is only likely to rise further. Shares -0.5% at 500p. ([email protected]) 0701 GMT [Dow Jones] Goldman Sachs downgrades Randgold Resources (RRS.LN) to sell from neutral but raises price target to 6740p from 6530p. Feels it is one of the few stocks in its coverage universe that is pricing in the bulk of the value from its growth projects. "As a result, we are concerned that should there be evidence that one of the four projects under development starts to slip behind budget or schedule, the shares could react badly." Shares -0.6% at 6210p. ([email protected]) 0659 GMT [Dow Jones] Goldman Sachs downgrades Hochschild Mining (HOC.LN) to neutral from buy but raises price target to 456p from 389p. Says after outperformance of the brokerage's European Metals coverage in the last 3 months, the upside potential implied by its revised 12-month price target no longer stands out. Still, says within GS's precious metals coverage, Hochschild shares still offer a good absolute valuation as well as gold and silver exposure at a valuation multiple discount to peers. Shares closed Thursday at 318p. ([email protected]) 0658 GMT [Dow Jones] Bovis Homes's (BVS.LN) 1H performance is solid but not dramatic, says KBC Peel Hunt. Says land spending is higher than the brokerage expected, which could lead to more rapid volume expansion across the next three years. "More aggressive land acquisition is the smart move - we believe it is right to buy land now even if prices are likely to slip back. It provides assurance and visibility into how margins can recover." Adds that the shares remain expensive. Keeps the stock at sell, with 365p price target. Shares closed Thursday at 349p. ([email protected]) Contact us in London. +44-20-7842-9288 [email protected] (END) Dow Jones Newswires July 09, 2010 05:39 ET (09:39 GMT)