UK MARKET TALK ROUNDUP: BROKERS COMMENTS

28th Jul 2010 13:18

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] 1218 GMT [Dow Jones] JPMorgan Cazenove raises Croda International (CRDA.LN) target price to 1400p from 1220p. Says this reflects a stronger than expected recovery in its industrial area, and continued growth in demand for personal care chemicals. Says that cashflows, and a reduction in debt through disposals, appear to indicate a strong balance sheet, while new product innovation, and continued demand for natural ingredients in cosmetic products, appears to be growing continuously. "The outlook on this basis appears encouraging, and this is against an economic background which is still relatively cautious," adds brokerage. Has an overweight rating. Shares -1.7% at 1250p. ([email protected]) 1126 GMT [Dow Jones] Global equities are entering into a difficult cycle but it is still appropriate to stay overweight says Credit Suisse. Admits that when the ISM index rolls over and earnings revisions turn negative, equities tend to trade sideways. But does not envisage a double dip. Thinks growth might slow to 3%-3.5% globally and 2%-2.5% in the US next year, but says the pre-conditions for a double dip are not in place. Also finds that equities offer relative value and return on equity (ROE) could surprise to the upside. Stays overweight equities. For end of '10E, predicts S&P 500 to be at 1220-level, the FTSE 100 at 6000 and the Stoxx 600 at 295. ([email protected]) 1056 GMT [Dow Jones] Goldman Sachs raises Daily Mail & General Trust (DMGT.LN) target price to 557p from 550p. Says the company's 3Q update is reassuring on all fronts. "Overall trading is said to be ahead of management expectations and the company is on track to reach its target of 2.5x net debt/Ebitda by year end," adds Goldman. Keeps neutral rating on the stock. Shares -0.4% at 485p. ([email protected]) 1043 GMT [Dow Jones] Royal Bank of Scotland raises Informa (INF.LN) target price to 470p from 450p. Says Informa's 1H result demonstrated a turning of the cycle; "both operationally (growth is about to turn positive) and from a capital allocation perspective (the dividend was upped by 25%)." RBS raises its full year EPS forecast by 5% to 34.7p. Has a buy rating, noting "Informa remains our favorite late-cycle play in the sector." Shares -0.1% at 394p. ([email protected]) 0938 GMT [Dow Jones] Royal Bank of Scotland downgrades Barratt Developments (BDEV.LN) to hold from buy and cuts target price to 110p from 162p. Says while higher land investment intensity will be validated if trading stability holds, it adds an extra layer of volatility in the event of macro weakness. Brokerage also downgrades Persimmon (PSN.LN) to hold from buy and cuts target price to 380p from 580p. Says 1H'10 trends have reinforced RBS's view that Persimmon may outperform consensus on pretax profit, net debt and NAV progression in FY'10. However, notes concerns over trading stability thereafter "and with our price target now weighted to a bear-case possibility, we downgrade to hold." RBS cuts Bovis Homes (BVS.LN) target price to 340p from 449p, Redrow (RDW.LN) target to 100p from 140p and Bellway (BWY.LN) to 640p from 870p, keeping at hold. Cuts Berkeley Group (BKG.LN) target to 955p from 1000p, Galliford Try (GFRD.LN) to 450p from 457p and Taylor Wimpey (TW.LN) target to 36p from 52p, keeping all at buy. ([email protected]) 0927 GMT [Dow Jones] BP'S (BP) management should be thinking of more radical changes to the company's structure than those announced Tuesday in order to return value to shareholders, says JPMorgan analyst Fred Lucas. BP's share price weakness following its 2Q results Tuesday may have been due to "disappointment that BP's thinking on a 'new and different BP' may simply mean a BP with a smaller upstream portfolio," he says. Gives overweight rating, 417p target. Shares -0.8% at 403p. ([email protected]) 0921 GMT [Dow Jones] Piper Jaffray downgrades ARM Holdings (ARM.LN) to neutral from overweight but raises target to 318p from 310p. "Although we believe ARM is one of the most solid stories in the semiconductor sector, we downgrade our recommendation to neutral on valuation grounds, with the shares trading at approximately 30x 2011 PE," says brokerage. It believes investors should look for a better entry point. "The scope of future earnings upgrades is now more limited. And the recent increase in the British pound versus the US dollar may play against the company," adds brokerage. Shares +0.4% at 335p. ([email protected]) 0754 GMT [Dow Jones] Tullow Oil (TLW.LN) encounters more than 40 meters of net oil bearing reservoir at its Ngiri-2 appraisal well in Uganda, "the largest net pay to date in the Butiaba region," says Evolution Securities. "We believe [Wednesday's] result is likely to add in the order of 5p-10p to our Core + Risked NAV." Evolution sees the announcement as the third good bit of news from the company in three days, with market sentiment turning back in favor of the stock. Has a buy recommendation and 1450p target. Shares +1.9% at 1297p. ([email protected]) 0752 GMT [Dow Jones] Exane BNP Paribas downgrades Cairn Energy (CNE.LN) and Dana Petroleum (DNX.LN) to neutral from overweight. Notes Dana shares have surged 71% since the brokerage upgraded the stock in February, and reckons the risk/reward is more balanced after Korea National Oil Corp raised its offer for the company. As far as Cairn is concerned, Exane says the exploration outlook remains promising, but notes the stock has outperfomed by 30% since initiation and reckons the Greenland risk/reward is fairly priced in. Has 1650p price target on Dana, and 450p target on Cairn. Dana shares flat at 1707p and Cairn shares +0.2% at 472p. ([email protected]) 0737 GMT [Dow Jones] Royal Bank of Scotland downgrades Pearson (PSON.LN) to sell from hold given share price strength, but raises target to 915p from 865p. Says while Pearson's recent 1H results were very good and demonstrate the company is currently in a sweet spot, headwinds are likely to gather in '11. Notes a third of Pearson's revenue is paid directly by the government, where austerity will likely become a growing problem. Also says Pearson faces around 2p/share of earnings dilution in '11 from net disposals. Shares -0.7% at 1015p. ([email protected]) 0732 GMT [Dow Jones] HSBC downgrades International Power (IPR.LN) to neutral from overweight. Continues to see a tie-up with GDF Suez (GSZ.FR) as offering compelling financial and operational logic for International power. However, sees potential for disappointment over the extent of the special dividend payable to International Power shareholders. Has a 370p target. Shares -0.5% at 368p. ([email protected]) 0719 GMT [Dow Jones] Compass Group's (CPG.LN) strong organic sales growth at the 3Q stage is likely to be sustained, suggesting a 5%-to-7% revenue growth rate in the medium term, says Shore Capital analyst Greg Johnson. However, a weaker-than-expected margin projection may disappoint the market, Johnson says. Buy rating. Shares +1.7% at 567p. ([email protected]) Contact us in London. +44-20-7842-9288 [email protected] (END) Dow Jones Newswires July 28, 2010 08:18 ET (12:18 GMT)