UK MARKET TALK ROUNDUP: BROKERS COMMENTS

5th Jul 2010 14:50

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] 1350 GMT [Dow Jones] Numis says it "continues to believe that the market is materially undervaluing" International Ferro Metals (IFL.LN). The brokerage adds a recent reduction in the ferrochrome benchmark settlement to $1.30 per pound 'could have been worse' and is "close enough to a roll-over to keep the South African producers from crying foul." Numis adds "International Ferro Metals could withstand a drop to the region of $1.20/lb for the rest of the financial year to June 2011 and still make a profit" which would represent "something close to a worst-case scenario." The brokerage maintains its buy recommendation. Shares -1.9% at 27p. ([email protected]) 0935 GMT [Dow Jones] Lloyds Banking Group's (LYG) sale of a portfolio of 40 private equity investments to a joint venture with Coller Capital "offers further confidence of a sharp fall in 2010e impairments," says Exane BNP Paribas analyst Ian Gordon, who expects a reduction of around 44% in 2010 impairments from 2009. "Slowly but surely, Lloyds is getting on with the job of divesting non-core assets and businesses," Gordon says, keeping an outperform rating and 80p target. Shares down 1.1% at 54p. ([email protected]) 0912 GMT [Dow Jones] Citigroup raises Burberry (BRBY.LN) target to 760p from 670p to reflect the upgrade to its March '12 EPS estimate to 46.7p from 42.7p. Notes the company's update on July 13 and says it expects 1Q '11 group underlying sales growth of 14%. Also forecasts reported sales of GBP259M, up 13% year-on-year. Post the recent market selloff, the shares trade at a slight premium to the peer group, but Citi says this is possibly justified by margin expansion potential and the upcoming initiatives aimed at strengthening the brand globally. Keeps at hold. Shares +0.5% at 743p.([email protected]) 0910 GMT [Dow Jones] Citigroup raises Standard Chartered (STAN.LN) price target to 2100p from 2000p to reflect peer multiples and updated estimates. Notes the group's wholesale bank in Asia has reported stellar growth in recent years. Says while it's only the third largest international bank in Asia, it has been the fastest grower in recent years. "Success has been driven by its strategic focus on Asia and emerging markets, gaining share from distracted competitors, new investments in talent and capital and an entrepreneurial management team." Keeps the stock at buy. Shares -0.4% at 1605p. ([email protected]) 0820 GMT [Dow Jones] Travis Perkins's (TPK.LN) acquisition of BSS Group (BTSM.LN) should bring healthy synergies to the group and remove major questions over Travis's growth prospects, says Collins Stewart. Says the merger will create the largest UK plumbing and heating group and estimates market share will rise from 17% to 25%. Has the stock at buy, with 909p price target. Travis Perkins shares -0.8% at 749p. ([email protected]) 0804 GMT [Dow Jones] UBS cuts Smith & Nephew (SN.LN) price target to 730p from 760p, citing currency headwinds. Says continuing economic uncertainty will likely see the management taking a cautious stance on its sales outlook in '10. Cuts its '10 EPS estimate to $69.23 from $70.52, and '11 EPS estimate to $76.03 from $77.94. "Recent share price weakness suggests that currency hits to 2Q '10 and a cautious near-term outlook is reflected in the share price." Keeps the stock at buy. Shares +0.8% at 586p. ([email protected]) 0739 GMT [Dow Jones] Evolution cuts Workspace Group (WKP.LN) to neutral from add. Says Workspace offers earnings growth potential by increasing the portfolio occupancy rate. "Despite the potential earnings growth, we see better value elsewhere, in both the large-cap REIT's and the operationally leveraged self-storage companies," adds brokerage. Says that aside of the potential earnings growth, the share price is compelling enough against other operationally geared companies. Keeps 23p price target. Shares flat at 21p. ([email protected]) 0728 GMT [Dow Jones] Lloyds Banking Group's (LLOY.LN) disposal of a portfolio of 40 private equity investments in its Bank of Scotland [BoS] Integrated Finance business is consistent with the group's strategy and is structured to allow Lloyds to share in future investment upside, says Shore Capital. Brokerage adds the transaction is not expected to have a material impact on the Lloyds Banking Group accounts. Still, remain cautious on Lloyds reflecting concerns over the UK economic recovery. Has a hold rating. Shares -0.4% at 55p. ([email protected]) 0658 GMT [Dow Jones] Credit Suisse adjusts ratings on UK housing stocks in its latest sector note. Brokerage believes buying opportunities remain within the sector, "despite downward revisions to our price and volume forecasts for 2011 and a significant change to our valuation methodology that materially reduces our average target prices." Credit Suisse maintains outperform ratings on Barratt Developments (BDEV.LN) with target price cut to 126p from 252p, Bellway (BWY.LN) with target cut to 737p from 1256p, Taylor Wimpey (TW.LN) with target cut to 36p from 65p and Persimmon (PSN.LN) with target cut to 392p from 678p. Upgrades Berkeley (BKG.LN) to outperform but cuts target to 907p from 920p. However, downgrades Bovis Homes Group (BVS.LN) to neutral from outperform and cuts target to 315p from 780p and downgrades Redrow (RDW.LN) to underperform from outperform and cuts target to 95p from 212p. ([email protected]) 0657 GMT [Dow Jones] Serco's (SRP.LN) announcement of a contract with the Ministry of Justice to provide and operate a new prison at Belmarsh West is "rubber stamping," as the deal was previously announced at the preferred bidder stage in June 2009, says a trader. Thinks it has been reiterated in light of all the spending cuts announced, with the company wanting to allay fears. Shares closed Friday at 567p. ([email protected]) 0649 GMT [Dow Jones] Investec lifts Carrs Milling (CRM.LN) target to 575p from 510p, and keeps ia buy rating. Follows the company announcing two acquisitions, which Investec says sit comfortably within the group's current portfolio of agricultural businesses, extending the product range and geographic footprint. Says the deals have been funded from current banking facilities and should be earnings enhancing in FY '11 and beyond. As a result lifts FY '11 and FY '12 EPS estimates by 7% and 9%, respectively. Shares closed at 480p Friday. ([email protected]) 0641 GMT [Dow Jones] Citigroup upgrades Wellstream (WSM.LN) to buy from sell and lifts target price to 580p from 410p. Says the risk-reward balance has turned favorable after the de-rating of the stock in anticipation of a weak 2H10 and despite the likely recovery from 2011, to be driven primarily by orders offshore Brazil. Adds that Wellstream is a growth stock in a highly technical industry, set to benefit from a rise in orders in Brazil, coupled with its operational leverage. "The weak current order intake outside Brazil and lackluster 2010 performance are already expected and priced in," adds Citigroup. Shares closed at 453p. ([email protected]) Contact us in London. +44-20-7842-9288 [email protected] (END) Dow Jones Newswires July 05, 2010 09:50 ET (13:50 GMT)