UK MARKET TALK ROUNDUP: BROKERS COMMENTS

20th Jul 2010 17:43

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] 1643 GMT [Dow Jones] S&P Equity Research cuts Unilever (ULVR.LN) price target to 2000p from 2150p following recent declines in peers' valuation multiples. Notes the company's agreement, subject to EU anti-trust clearance, to sell its Findus Italy frozen foods activities to the Birds Eye Iglo business owned by private equity firm Permira. Says the proposed disposal proceeds are EUR805M, which S&P views as reasonable for this type of business. Keeps the stock at hold. Shares closed Tuesday -0.6% at 1879p. ([email protected]) 1525 GMT [Dow Jones] Online grocer Ocado has cut the price range of its planned initial public offering to between 180p and 200p, from a previous range of 200p-275p. An analyst notes that as the price goes down, so investor interest will reduce and orders will get pulled. On the other hand, another analyst says "they've done the decent thing and the price cut will give them a better chance of achieving a premium on day one." A trader notes the fact Ocado has got backing for more than three quarters of the stock up for sale in its IPO, and says "undersubscribed is a failure." Order books for the offer close later Tuesday. ([email protected]) 0944 GMT [Dow Jones] Panmure Gordon lowers Gem Diamonds (GEMD.LN) target price to 220p from 288p following "disappointing" 1H production and pricing update at The Letseng diamond mine. "Whilst Gem Diamonds believes that the shortfall in 1H production at Letseng can be made up in the second half, we are doubtful," says Panmure, noting the near term outlook continues to look challenging. Adds production at the Ellendale diamond mine is also lower than expected, but was offset by higher prices. Has a hold rating. Shares +1.0% at 215p. ([email protected]) 0928 GMT [Dow Jones] Dairy Crest (DCG.LN) has made a solid start to the year, with continued sales progress of 3% for its five key brands, although this was impacted by some price deflation, says Investec Securities. "Delivery of cost savings appears on track, which is helping to support the advertising and & promotional activity for the major brands." Keeps the stock at hold with 385p price target. Shares -0.4% at 387p. ([email protected]) 0924 GMT [Dow Jones] Goldman Sachs downgrades Ceres Power (CWR.LN) to neutral from buy and slashes the price target to 75p from 350p. This follows the announcement on July 2 that the company is delaying the initial product sales of its combined heat and power boilers until mid-2012. Goldman says its original investment thesis was based on long-term growth potential, and this is now receding in time. Says the delay is disappointing but the longer term growth trend remains encouraging particularly given the strategic partnerships with British Gas, Calor Gas and Bord Gais. Shares are +0.9% at 58.5p. ([email protected]) 0906 GMT [Dow Jones] Ryanair (RYA.DB) +0.1% at EUR3.83 after posting 1Q numbers. Ryanair 1Q net profit, excluding exceptionals, is 1% higher versus the same period last year, around GBP10M higher than consensus, Panmure notes. It says these are solid numbers, but they don't suggest a change to forecasts. Maintains buy recommendation and EUR5 target, saying the shares are trading on undemanding multiples. ([email protected]) 0829 GMT [Dow Jones] Barclays Capital upgrades BHP Billiton (BLT.LN) to overweight from equalweight and increases the target to 2900p from 2700p, expecting a significant rerating of its equity valuation over the next year. It is now one of BarCap's preferred miners. On the other hand, downgrades Kazakhmys (KAZ.LN) to equalweight from overweight and cuts target to 1500p from 1900p to reflect the risk of capex inflation and higher operating costs due to declining copper grades at the company's mines. It's still bullish on copper, and likes Kazakhmys's leverage to the copper price, but prefers Xstrata (XTA.LN), rated overweight. ([email protected]) 0730 GMT [Dow Jones] Seymour Pierce keeps its sell recommendation on Enterprise Inns (ETI.LN) despite an upbeat trading update. "The long-awaited upturn in trading, to get back to positive real like-for-likes and hence upgrades in forecasts, is yet to materialize," Seymour says. "This is needed in order for us to believe that Enterprise can return to being treated as a more normal equity story." Shares -2.2% at 96p. (MIC) 0712 GMT [Dow Jones] Despite the disappointing results from Texas Instruments (TXN) late Monday, there is no material impact to the UK semis, says Execution Noble. Says it was largely a well-documented "customer specific issue" with Nokia (NOK) that impacted Texas' results. Notes CSR (CSR.LN) is regaining its market share at Nokia, but also its latest Bluetooth chip is primarily targeted at the low/mid-tier feature phone market and shipping to multiple handset vendors. Has CSR at buy, and is Execution Noble's top-pick in the space. On the other hand, says the sharp year-to-date rise in other UK semi stocks, along with hefty valuations, leave no room for disappointment as the 2Q '10 reporting season gets underway. ([email protected]) 0709 GMT [Dow Jones] William Hill's (WMH.LN) first-half trading update is "positive," with online operations showing a "strong" performance, Liberum Capital analyst Nigel Hicks says. Adds the stock is undervalued, along with its peers. "We view both William Hill and Ladbrokes (LAD.LN) as extremely cheap stocks," he says. "We think that the market is too low on forecasts, although the start of the Premiership during August and into September is key to the third quarter rebounding against a very weak comparative," Hicks adds. Has a buy rating. Shares -0.2% at 179p. ([email protected]) 0655 GMT [Dow Jones] William Hill (WMH.LN) offers a 2Q trading update Tuesday, with trading slightly Shore Capital's expectations given the anticipated World Cup benefit and move to Gibraltar. Following this update, Shore considers cutting its 2010 EPS estimate to 19p [in line with consensus] from 20p, reflecting a weaker retail market. Still, it keeps a buy rating, as the company remains attractive given the group's cash generation, with continued debt reduction alone expected to drive earnings. Shares closed Monday at 178p. ([email protected]) 0655 GMT [Dow Jones] William Hill (WMH.LN) can be expected to see "pressures on trading in the next twelve months," Numis Securities analyst Wyn Ellis says. "William Hill has a combination of operational excellence and operating and financial leverage, which will make the shares an attractive investment when confidence among its consumers returns. But that return of confidence seems some way off and, without it, maintaining profits in the betting shops will be hard work," Ellis says. Says the group's outlook is in line with the broker's forecasts. Has a hold rating and 188p target. Shares closed Monday at 179p. ([email protected]) Contact us in London. +44-20-7842-9288 [email protected] (END) Dow Jones Newswires July 20, 2010 12:43 ET (16:43 GMT)