UK MARKET TALK ROUNDUP: BROKERS COMMENTS

16th Jun 2010 07:53

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] 0653 GMT [Dow Jones] Shore Capital cuts its pretax profit forecast on Home Retail (HOME.LN) by 8% to GBP292 million and assumes a weaker sales environment for its two businesses, Argos and Homebase. "Argos has had a difficult start to the year, impacted by weakness in two significant product categories, namely televisions and gaming," analyst Kate Calvert says. However, Calvert says the intrinsic value of the stock remains attractive. Buy rating. Shares closed Tuesday at 231 pence. ([email protected]) 0653 GMT [Dow Jones] ING raises British Sky Broadcasting (BSY.LN) target price to 765p from 700p following News Corp's (NWS) offer to buy out the shares it does not already own in the company. ING says long-term shareholders will rightly want to see more upside in the shares considering that any merger is likely to take over 12 months to close. "Our 830p [target price] upside scenario is consistent with the position taken by BSkyB's independent non-executives who would consider bids above 800p," ING adds. Buy rating. News Corp, which owns Dow Jones & Co., the publisher of this newswire, has a stake of about 39% in BSkyB. Sky Shares closed at 700p. ([email protected]) 0648 GMT [Dow Jones] Citigroup upgrades Drax Group (DRX.LN) to hold from sell, and increases its target price to 405p from 395p. Says the upgrade is to reflect both the improving commodity price environment for UK coal-fired generators, and latest forward contracting positions and guidance. "UK forward gas prices have rallied strongly recently, with year forward gas up 29% since April, driving up the corresponding base load power price by 23%," it adds. Shares closed at 384p. ([email protected]) 0648 GMT [Dow Jones] JPMorgan Cazenove downgrades BHP Billiton (BLT.LN), Fresnillo (FRES.LN) and Lonmin (LMI.LN) to underweight from neutral. For BHP, the rating cut reflects the stock's valuation premium against peers and lack of operational and financial leverage to any one commodity, says JPM. For Fresnillo, JPM says the stock's starting to look fully-valued after a strong run over the past few weeks. For Lonmin, "we are concerned that operational issues may prevent the company from fully taking advantage of platinum group metal price rises going forward, combined with premium valuation and uncertainty over Xstrata's (XTA.LN) intentions." 2000p target on BHP, 990p on Fresnillo and 1550p on Lonmin. ([email protected]) 0645 GMT [Dow Jones] J Sainsbury's (SBRY.LN) 1Q like-for-like sales of 1.1% excluding petrol but including VAT, are slightly below Execution Noble's estimate of 1.5%, the brokerage says. However, its estimate was ahead of consensus. Execution prefers either Tesco (TSCO) or Morrison (MRW.LN), with 22% and 35% upside to the brokerage's respective fair values respectively. Sainsbury rated at hold. Shares closed Tuesday at 324p. ([email protected]) 0643 GMT [Dow Jones] Citigroup upgrades Aggreko (AGK.LN) to buy from hold, and lifts its target price to 1733p from 1450p. Says the investors' trip to Africa highlighted the sheer magnitude of opportunity which Aggreko has over the short, medium and long run in temporary power. "We think there are many years of growth in prospect," it says. Also thinks the company has developed a virtuous cycle "based on its excellent brand, reputation, capital investment and profitability." Shares closed at 1445p. ([email protected]) 0640 GMT [Dow Jones] Royal Bank of Scotland raises Weir Group (WEIR.LN) price target to 1337p from 1194p following the company's strong trading update and the announcement of its acquisition of Malaysia-based Linatex. Says the minerals division and SPM continue to trade very well in 2Q '10. Adds the acquisition of Linatex should result in cost and sales synergies in '11/'12. Has buy rating on the stock. Shares closed Tuesday at 1087p. ([email protected]) 0634 GMT [Dow Jones] Sainsbury (SBRY.LN) first-quarter results are worse than Tesco's, published Tuesday, Seymour Pierce analyst Freddie George says. George says Sainsbury same-store sales growth excluding value-added-tax is about 0%. He says the stated trading period for Sainsbury's 1Q, ending June 12, is an 'easier' retailing period than Tesco's first-quarter. Sell rating. Shares closed Tuesday at 324p.([email protected]) 0631 GMT [Dow Jones] HSBC downgrades Home Retail Group (HOME.LN) to underweight from neutral, and cuts its target price to 226p from 285p following the company's 1Q update. Says trading at Argos was worse than expected. Expects increased price pressure in key categories to weigh on sales and potentially gross margins at Argos. Also notes longer-term structural concerns. Shares closed Tuesday at 231p. ([email protected]) 0630 GMT [Dow Jones] Deutsche Bank initiates Shire (SHP.LN) at buy, with 1650p price target. "Having navigated the loss of exclusivity on its best-selling drug, Adderall XR, Shire can look forward to a period of strong revenue and earnings growth, based on a rebound in its ADHD franchise and on rapid growth from its biologics-based human genetic therapies business," says Deutsche Bank. Says the company's attractive growth and cash flow outlook should command a premium rating. Shares closed Tuesday at 1427p. ([email protected]) 0623 GMT [Dow Jones] J Sainsbury's (SBRY.LN) 1Q update is slightly disappointing, says an analyst. The analyst notes that on a VAT-inclusive basis, the 1.1% like-for-like sales excluding petrol, is exactly the same as that which Tesco (TSCO.LN) achieved, despite the extra two weeks of trading Sainsbury enjoyed, pre World Cup. Still, the analyst says the new space growth is pleasing. Shares closed Tuesday at 324p. ([email protected]) Contact us in London. +44-20-7842-9288 [email protected] (END) Dow Jones Newswires June 16, 2010 02:53 ET (06:53 GMT)