UK MARKET TALK ROUNDUP: BROKERS COMMENTS

21st Jun 2010 14:30

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] 1330 GMT [Dow Jones] S&P Equity Research cuts Rio Tinto (RIO.LN) price target to 4000p from 4600p to reflect the impact of the proposed Australian Resource Super Profits Tax and lower sector multiples. The market has over-reacted to the tax, which if fully implemented, S&P reckons would lower group EPS by around 20% a year from '13. Notes there are many hurdles to overcome for the tax to be introduced. "Interestingly, our target price remains above current levels if we assume full Resource Super Profits Tax implementation, reflecting our view of Rio's strong market positions." Buy rating. Shares +4.8% at 3486p. ([email protected]) 1322 GMT [Dow Jones] S&P Equity Research cuts BHP Billiton (BLT.LN) target price 2300p from 2700p to reflect the impact of the proposed Australian Resource Super Profits Tax and lower sector multiples. S&P Equity thinks the market has over-reacted to the mining tax, which if fully implemented, S&P reckons would lower group EPS by around 15% a year from '13. S&P Equity believes the tax plan has a 50% chance of being approved and the brokerage has weighted its post '13 estimates accordingly. Still, it remains positive on the stock, which it keeps rated buy. Shares +4.7% at 2031p.([email protected]) 1000 GMT [Dow Jones] Bank of America Merrill Lynch trims Man Group (EMG.LN) price target to 355p from 360p, "reflecting a combination of lower estimates, wider credit spreads and lower bond yields." It cuts its '11 EPS estimate to $0.34 from $0.40, '12 EPS to $0.43 from $0.49 and '13 EPS to $0.57 from $0.60 to reflect a slightly different view on expenses, rather than the FY'10 results themselves, which were ahead of estimates. BofA continues to like Man and thinks the acquisition of GLG Partners (GLG) is a clear positive which makes strategic sense. Buy rating. Shares +1.9% at 253p. ([email protected]) 0918 GMT [Dow Jones] Credit Suisse cuts Premier Foods (PFD.LN) price target to 25p from 35p. Says things are far from easy for UK grocers, with food inflation all but gone, promotional levels up and no relief from raw material costs. With regards to the 1H, thinks operating profits will be down to GBP107M from GBP116M, reflecting higher restructuring, pension charges and marketing. Also thinks shareholders look "third in line" to the pension fund and banks. Says, "until their standing improves, it is very hard to recommend the equity." Keeps at hold. Shares are +1.8% at 22.1p. ([email protected]) 0918 GMT [Dow Jones] Following last week's developments, focus will now revert back to BP's (BP.LN) effort to contain the spill in the Gulf of Mexico, says Dolmen Securities. It notes work continues to progress ahead of schedule on the two relief wells which offer the best chance of a solution to the leak. Dolmen reckons these wells could now reach target depth by mid-late July, adding this is an improvement on the originally forecasted date of early August. "Our view remains that BP is a strong and viable company that will be able to absorb the fallout from the spill, however, last week's developments highlight the power that the White House has over the eventual outcome of the disaster for BP." Buy rating. Shares -3.6% at 345p. ([email protected]) 0659 GMT [Dow Jones] NCB Stockbrokers continues to see good value in Hammerson (HMSO.LN), following the company's acquisition of the remaining 75% of Battery Retail Park in Birmingham. Says Battery is a "prime" retail park and the asset offers further redevelopment potential. Meanwhile, thinks the group benefits from a strong balance sheet, low gearing and high occupancy portfolio. Reiterates buy recommendation. Shares closed Friday at 360p. ([email protected]) 0656 GMT [Dow Jones] Morgan Stanley upgrades Thomas Cook Group (TCG.LN) to equalweight from underweight but retains a 230p target. Whilst uncertainties over current trading against the backdrop of largely fixed summer capacity remain, the company can reach the brokerage's forecasts this year says Morgan Stanley. "while [volcanic] ash costs mean 3Q is unlikely to be that encouraging, cost savings are skewed to 2H and forex is more favorable, so the companies are confident they can make our FY forecasts," Morgan Stanley says. "With the shares on 8x P/E, a 5.5% dividend yield and below our price target, we cannot justify being underweight." Shares closed Friday at 201p. ([email protected]) 0654 GMT [Dow Jones] HSBC downgrades Game Group (GMG.LN) to underweight from neutral. Says difficult underlying market trends are weighing on top-line growth. Says there will be a small catalyst in the 3Q with motion sensor technology but says 1H will deliver a pretax loss. Does not see any major catalysts until the launch of fourth-generation consoles from FY '13. Lowers '11 EPS forecast by 36% to 8.4p Cuts the price target to 75p from 100p. Shares closed on Friday at 83p. ([email protected]) 0646 GMT [Dow Jones] HSBC upgrades ASOS (ASC.LN) to overweight from neutral. Says the company announces a small pretax profit beat in its final results and current trading is significantly ahead of market expectations. Says in current trading, group retail sales for the nine weeks to June 6 are up by 58%. Pushes up the price target to 1000p from 660p. Shares closed Friday at 761p. ([email protected]) 0635 GMT [Dow Jones] Investec downgrades Arm Holdings (ARM.LN) to hold from buy. Thinks the share price now reflects much of the medium-term upside. Still thinks company specifics will remain positive, but is concerned that the industry outlook may be reaching a short-term peak. Says forecasts are now incorporating best-case scenarios for consumer spending and the rush towards smartphones. Says "this may well materialize but is unlikely...to be substantially exceeded." Maintains 290p price target. Shares closed Friday at 290.2p. ([email protected]) 0558 GMT [Dow Jones] Citigroup downgrades Victrex (VCT.LN) to hold from buy, saying the shares have risen 45% year-to-date. Says on cycle-year '10 earnings Victrex shares trade on 18.8x PE and 11.5x EV/Ebitda, which is at the top of its historical range. However, increases the price target to 1150p from 1100p. Sees EPS momentum skewed to the upside given the potential growth of Invibio, and the probability that sterling remains weak and the economy continues to recover. Lifts '10 EPS forecast to 61.1p from 59.7p, and '11 EPS to 71.3p from 64.9p. Shares closed Friday at 1140p. ([email protected]) Contact us in London. +44-20-7842-9288 [email protected] (END) Dow Jones Newswires June 21, 2010 09:30 ET (13:30 GMT)