UK MARKET TALK ROUNDUP: BROKERS COMMENTS

5th Jul 2010 09:04

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] 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]) 0638 GMT [Dow Jones] Credit Suisse upgrades International Personal Finance (IPF.LN) to outperform from neutral, given around 47% potential upside to its 270p price target. Raises its '10 EPS estimate by around 3% to 25.7p to reflect a lower impairment charge and modestly higher asset growth forecasts following the company's recent trading update. Says it was encouraged by the improvement in operating performance in Hungary. Expects 1H results to reiterate positive trends, and says they will act as a positive catalyst for the shares to reverse some recent price weakness. Shares closed Friday at 185p. ([email protected]) 0631 GMT [Dow Jones] Royal Bank of Scotland upgrades Pearson (PSON.LN) to hold from sell, as the shares are now at the brokerage's 865p target and it no longer sees valuation downside. It also no longer sees a risk that Pearson will pay a strategic price for Santillana. Reckons the company will focus on smaller bolt-on deals where the financial returns are likely to be better. Nevertheless, RBS remains concerned about the company's late cycle exposure to US School and counter-cyclical exposure to US College. Shares closed Friday at 867p. ([email protected]) 0629 GMT [Dow Jones] Morgan Stanley initiates Cable & Wireless Worldwide (CW.LN) with an underweight rating and 85p target price. Says that as expectations for gross margin look likely to be disappointed and/or higher data revenues will require higher capital intensity. "The FY11 estimates themselves look like a stretch given weak trends in FY10, yet consensus ratings are overwhelmingly positive," it adds. Brokerage's bull case is for market share growth in the UK/growth in hosting and cloud computing to offset legacy declines to bring gross margin growth. Shares closed at 85p. ([email protected]) 0629 GMT [Dow Jones] UBS downgrades WS Atkins (ATK.LN) to neutral from buy and cuts target to 700p from 750p, saying the stock lacks underlying momentum. Notes economic uncertainty and concerns about cuts in UK public sector spending mean the 12-24 month revenue outlook is weak. Says while margins have been steadily improving over the last 18 months, tough trading conditions continue and headcount reductions are slowing, meaning no earnings momentum. Cuts '11 EPS estimate to 66.65p from 67.28p and '12 EPS estimate to 61.84p from 68.19p. Shares closed Friday at 682p. ([email protected]) 0621 GMT [Dow Jones] Serco Group's (SRP.LN) contract with the Ministry of Justice to provide and operate a new prison at Belmarsh West, London, is clearly good news for the company, says a trader, particularly in light of last week's headlines about cuts in the prison budget. Notes the contract is worth GBP415M over 26.5 years. Shares closed Friday at 567p. ([email protected]) Contact us in London. +44-20-7842-9288 [email protected] (END) Dow Jones Newswires July 05, 2010 04:04 ET (08:04 GMT)