UK MARKET TALK ROUNDUP: BROKERS COMMENTS

28th Jun 2010 16:31

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] 1531 GMT [Dow Jones] The creation of separate US and Rest-of-the- World entities at BP (BP.LN) would increase transparency, UniCredit says. "BP US would define the worst-case scenario of asset seizure, ring fence liabilities and vulnerable assets, offer upside potential from leverage to the rump value. BP 'ROW' would be able to operate, invest and pay dividends, without the uncertainties surrounding the consequences of Macondo." UniCredit sees a demerger as a viable option to set a ceiling on potential losses and release the value of the non-US activities. Hold rating, 420p target. Shares +1.5% at 306p.([email protected]) 1128 GMT [Dow Jones] Lavendon Group's (LVD.LN) update confirms trading is in line and trends are generally improving, says Investec Securities. It notes cash generation continues to be good. "We continue to believe that, as the largest powered access rental business in Europe, Lavendon has a strategic value. In the meantime, the de-leveraging of the balance sheet continues to transfer value from the debt to the equity component of Lavendon's enterprise value." Buy rating, 125p target. Shares -5.5% at 60p.([email protected]) 1124 GMT [Dow Jones] Investec Securities remains a buyer of Taylor Wimpey (TW.LN), but thinks the shares could weaken in the short term. The company's 1H update starts off relatively upbeat, but deteriorates in tone, notes Investec. The statement mentions concerns over the Autumn spending review [by the UK government] in terms of the removal of housing grants and planning. Investec adds that the US market remains volatile. It prefers less risky plays in the sector, like Bellway (BWY.LN), Berkeley (BKG.LN) and Galliford Try (GFRD.LN), which it rates at buy. Taylor Wimpey rated buy, 41p target. Shares -1.4% at 30p. ([email protected]) 1030 GMT [Dow Jones] BP (BP.LN) can absorb the fallout from the Gulf Of Mexico oil spill, as its balance sheet and cashflows sufficient financial flexibility, says Dolmen Securities. Dolmen notes drilling on the two relief wells is progressing ahead of schedule and the addition of the Q4000 with a free-standing riser has increased collection rates by approximately 10,000 barrels a day. "Despite this, much uncertainty remains over the eventual cost of the disaster. As a consequence short-term price action will continue to be driven by media commentary rather than stock fundamentals." Short-term, BP remains a speculative buy, says Dolmen. Shares +3.8% at 316p. ([email protected]) 0955 GMT [Dow Jones] Collins Stewart downgrades Dana Petroleum (DNX.LN) to hold from buy. Recent exploration results have been on-balance disappointing and leave the stock with reduced near-term upside potential, says CS. "Recent bid rumors have boosted the stock and although the valuation upside still looks reasonable, we don't believe it is that compelling any more," says CS. At current levels Dana offers 34% upside to brokerage's full NAV estimate but CS sees much better upside in Premier oil (PMO.LN) and Lundin Petroleum (LUPE.SK). Dana shares +0.1% at 1178p.([email protected]) 0853 GMT [Dow Jones] Panmure Gordon downgrades Mears Group (MER.LN) to hold from buy and cuts price target to 230p from 330p. Notes the company has issued two statements since Connaught's (CNT.LN) profit warning, stating that trading is strong across all divisions and in line with management expectations. Nevertheless, Panmure says it needs to reflect that the sector will now be regarded as less attractive. Mears shares flat at 249p. ([email protected]) 0849 GMT [Dow Jones] Panmure Gordon cuts Greene King (GNK.LN) target to 450p from 500p ahead of the company's results on July 1. Panmure says it struggles to identify catalysts for outperformance vs the peer group. "With beer prices set to rise again in January with the VAT increase and in April with the 2% above inflation beer duty increase we think profits will continue to be depressed at the outlet level in both managed and tenanted pubs." Reiterates hold recommendation on the stock. Shares +0.8% at 402p. ([email protected]) 0741 GMT [Dow Jones] PartyGaming (PRTY.LN) has been awarded a French gaming licence, showing more progress in new markets, says KBC Peel Hunt. Says France is an exciting opportunity for PartyGaming, despite the short-term marginally negative impact on revenues. Says this licence extends the bridgehead established by the company's existing partnership deals, and is further evidence of management's ability to execute. Keeps buy rating. Shares -1.6% at 247p. ([email protected]) 0709 GMT [Dow Jones] France is likely to become a key market for online operators, now that PartyGaming (PRTY.LN) has been offered a French gaming license, says Shore Capital. As a result sees significant growth potential, although the current tax regime implemented by French regulators will likely limit profitability in the near term. Expects both 888 Holdings (888.LN) and Sportingbet (SBT.LN), rated hold and buy respectively, to apply for gaming licenses. Keeps PartyGaming at sell due to its premium rating to the sector and exposure to the online poker market, which is under pressure. Shares -1.6% at 247p. ([email protected]) 0705 GMT [Dow Jones] BT Group (BT) and British Sky Broadcasting (BSY.LN) contract for the wholesale supply of Sky Sports 1 and Sky Sports 2 is not unexpected news given that BSkyB will have to allow three rival broadcasters to show Premier League soccer matches, says an analyst. "Overall, the deal looks better for BT, as the company looks to prop up its BT Vision platform. The addition of Sky Sports allows BT to attract more customers," analyst adds. However, BSkyB may not be as pleased with the deal as it continues to fight the wider ruling that it must wholesale content at regulated prices. News Corp., which owns Dow Jones & Co., the publisher of this newswire, has a stake of about 39% in BSkyB. BT shares +0.1% at 131p while BSkyB shares +0.4% at 704p. ([email protected]) 0659 GMT [Dow Jones] Taylor Wimpey's (TW.LN) update shows that trading has strengthened in recent weeks, after a slight softening in sales around the time of the general election, says Shore Capital. Says management is continuing to focus on price improvements rather than volumes. Elsewhere, notes that net debt remains relatively high at about GBP650M. Keeps Taylor Wimpey at hold. Prefers Berkeley Group (BKG.LN) rated at buy, which has a strong balance sheet and favorable skew towards London and the south-east region. Taylor Wimpey shares closed Friday at 30p. ([email protected]) 0657 GMT [Dow Jones] Standard Chartered's (STAN.LN) preclose statement looks in line with expectations says Liberum Capital. The brokerage's 1H '10 income forecast of $7.89B tallies with the bank's expectations for flat income in the first six months of the year. Says loan impairments continue to trend favorably but then again, notes that these have never been particularly elevated at this bank. Maintains hold recommendation. Shares closed on Friday at 1742p. ([email protected]) Contact us in London. +44-20-7842-9288 [email protected] (END) Dow Jones Newswires June 28, 2010 11:31 ET (15:31 GMT)