UK MARKET TALK ROUNDUP: BROKERS COMMENTS

21st Jul 2010 12:11

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] 1111 GMT [Dow Jones] S&P Equity Research cuts Reckitt Benckiser (RB.LN) price target to 3600p from 3700p following recent declines in peer multiples. It notes the company's proposed acquisition of SSL International (SSL.LN) and says if it is completed, it will re-gear Reckitt and enhance its EPS from '11. "We view this proposed acquisition as sensible though not inexpensive." Keeps Reckitt rated hold. Shares +2.5% at 3268p. ([email protected]) 1032 GMT [Dow Jones] Merchant Securities upgrades SThree (STHR.LN) to hold from sell. The shares have fallen since June's trading update, taking its share price into line with Merchant's lowered price target of 250p. Merchant says SThree was last into the downturn and its first-half results suggest it will be last out. It says SThree's recovery is lagging some way behind that of other staffing majors. 250p price target. Shares -1.4% at 251.5p. ([email protected]) 0950 GMT [Dow Jones] BP's (BP.LN) asset sales to Apache (APA) are positive says Credit Suisse. "This transaction should remove concerns on BP's ability to finance its obligations." Apache will pay BP a cash deposit of $5B, notes CS. It estimates a total post-tax cost net to BP for Macondo of $44B over four years and after this move and based on existing funding lines of about $10B, CS thinks BP is able to fund up to $34B of costs and liabilities pretax. Excluding Macondo, CS estimates BP can generate $40B of free cashflow, fully covering $29B of post-tax Macondo costs and $10.5B of '11 dividends. Outperform rating, 515p target. Shares +3.8% at 402.2p. ([email protected]) 0940 GMT [Dow Jones] The sale of BP's (BP.LN) US, Canada and Egypt assets to Apache Corp (APA) is a positive development, says Dolmen Securities. It marks the beginning of BP's divestment program, which will allow it to position its balance sheet so as to absorb the fallout from the Gulf of Mexico disaster, the brokerage says. Dolmen notes BP is expected to continue this program of asset sales over the coming weeks, with the oil major announcing Tuesday that it had informed the government and staff in Pakistan and Vietnam it intends to sell the majority of its assets in those regions. Shares +3.9% at 403p. ([email protected]) 0937 GMT [Dow Jones] Panmure Gordon lifts its target price for SL International (SSL.LN) to 1163p from 885p, following Reckitt Benckiser's (RB.LN) cash offer of 1171p/share. Panmure doesn't see a counter offer being made and expects shareholders to accept the offer. The acquisition would represent an excellent strategic fit for Reckitt - with both Durex and Scholl becoming 'power brands' within the Reckitt stable - and should deliver continued growth. The acquisition would also enhance Reckitt's position in both China and Japan. SSL rated buy. Shares +33% at 1175p. Reckitt +2.6% at 3273p. ([email protected]) 0753 GMT [Dow Jones] Hochschild (HOC.LN) second-quarter production figures are solid, says Ian Rossouw of JPMorgan Cazenove. "Overall [this is] a positive release from Hochschild with a strong recovery in production and year-to-date production tracking in line with our FY2010 forecast with some potential to surprise to the upside." Ares, which is expected to close in 2H 2010, performed above expectations as it's effectively already produced what Cazenove estimated for the full year. The mine may now continue production beyond the scheduled close. Exploration also, is proceeding in line with expectations. Shares -0.8% at 290.90p. ([email protected]) 0737 GMT [Dow Jones] Hochschild (HOC.LN) shares are slightly lower in thin volume while the rest of the FTSE mining sector is up because the miner's second quarter results were in line with expectations and failed to excite investors, says Cailey Barker of Numis Securities. Market participants "were expecting a bit more....[There] was no real update on the strategic stuff and people wanted more [news] on exploration," he says. Numis has a hold rating and a 330p target. Hochschild -0.1% at 293p. ([email protected]) 0701 GMT [Dow Jones] Ocado Group's transition to becoming a listed company is proving to be a challenge, says Shore Capital. Says Ocado will clearly be disappointed that it has not raised the desired funds to proceed with the floatation at the aspired issue price of 200p-270p a share. However, the brokerage sees this as a "victory for common sense." Moreover, thinks that a revised 180p price is still too high for Ocado at this juncture. In the meantime, says the reputation of the company and the stock can only be tarnished by recent events, "which is a shame for all concerned," says Shore. ([email protected]) 0659 GMT [Dow Jones] Reckitt Benckiser's (RB.LN) acquisition of SSL (SSL.LN) will accelerate its shift to the faster growing and higher margin health and personal care sector, says Chas Manso at Evolution. Says deal has been rumored for many years but now Reckitt has the balance sheet to do it. "The strategic rationale has been apparent for quite some time," he says. He rates Reckitt buy with 3800p target price. Shares closed Tuesday at 3190p. ([email protected]) 0657 GMT [Dow Jones] BP (BP) got a good commercial price for the $7 billion in assets it agreed to sell to Apache (APA) Tuesday, says ING analyst Jason Kenney. "Based on the book value it looks like a positive divestment," with a price of $19.44 a barrel for proved reserves. "I don't see this asset sale process as a fire sale...it's a good opportunity for BP to offload some peripheral businesses," he says. BP shares closed Tuesday at 387p. ([email protected]) 0654 GMT [Dow Jones] Land Securities Group (LAND.LN) is "delivering as you like to see in the current market," says JPMorgan. Has three main points: the company confirms the start of Trinity Leeds Shopping Center development, which is welcome; it delivers on targets, including progress on its development pipeline, sales and acquisitions, and "exactly what you would like to see in this type of environment; and Land Securities maintained its medium-term recovery outlook. Has neutral rating, with a target price of 765p. Shares closed at 581p. ([email protected]) 0652 GMT [Dow Jones] Piper Jaffray upgrades Anite (AIE.LN) to neutral from underweight, and lifts the price target to 41p from 28p. Says the company's FY '10 results are ahead of expectations, and it is building a strong position in 4G/long-term evolution (LTE) in its wireless division. Says FY '11 will likely continue to be 2H weighted, but thinks the risk profile is changing. Says, "with clear signals that Anite is well positioned to gain a strong market position in 4G/LTE we feel the risk profile is shifting on Anite." Shares closed on Tuesday at 38.8p. ([email protected]) Contact us in London. +44-20-7842-9288 [email protected] (END) Dow Jones Newswires July 21, 2010 07:11 ET (11:11 GMT)