UK MARKET TALK ROUNDUP: BROKERS COMMENTS

15th Jul 2010 12:33

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] 1133 GMT [Dow Jones] Panmure Gordon downgrades SDL (SDL.LN) to hold from buy and raises target price to 513p from 512p. This follows Thursday's acquisition of company Language Weave, which moves SDL's price-to-earnings ratio to 16.8x, says Panmure. Sees the deal as dilutive although says that 3.2x reported EV/sales is the correct valuation. Panmure lowers 2011 EPS estimate to 31.4p from 32.2p but increases '12 EPS to 36.9p from 34.4p. Concurs with SDL's view that the digital universe is set to rise tenfold in the next five years and this expansion will be across the globe. Shares +1.9% at 513p. ([email protected]) 1040 GMT [Dow Jones] Experian's (EXPN.LN) 1Q update shows a stronger start to the year than expected and its biggest growth in three years, says Charles Stanley. It notes at constant exchange rates, organic revenue growth was 6% versus the brokerage's expectation of 4%. Unchanged revenue guidance reflects an exceptionally strong performance in Brazil, but this may not be sustainable, says CS. And unchanged Ebit guidance reflects margin challenges from higher investment in product and staff. Nevertheless, the brokerage is encouraged, noting good cashflow, $300M buyback and increased dividend. Buy rating. Shares +3.2% at 653p. ([email protected]) 0939 GMT [Dow Jones] Panmure Gordon increases Greene King (GNK.LN) target price to 456p from 450p to reflect solid operational progress and the acceleration of the group's expansion strategy. As a result, Panmure increases its '11 EPS forecast to 46.63p from 44.58p and '12 to 49.29p from 45.62p. However, the brokerage says net debt is likely to remain broadly the same over the next two years with net-debt-to Ebitda reducing to 4.8x at the end of FY '12 from 5.1x at the end of FY '10. Hold recommendation. Shares -1.1% at 446.7p. ([email protected]) 0928 GMT [Dow Jones] Seymour Pierce upgrades JD Wetherspoon (JDW.LN) to hold from sell. Sees improving trading momentum and says the valuation is at more reasonable levels. Notes that the share price performance has been volatile over '10 and now thinks the correction in the share price has gone far enough. Meanwhile, says the company's preclose trading statement shows growth in 4Q like-for-like revenues. In the long term, is a fan of the business model. Maintains 450p price target. Shares -0.4% at 421p. ([email protected]) 0917 GMT [Dow Jones] Numis raises its forecasts for Abcam's (ABC.LN) fiscal 2010 earnings following a trading update that signaled profit will be 9% ahead of market consensus, thanks to a weak pound and better margins. "The world's favorite online antibody retailer does it again," says analyst Jonathan Kwok, upping his earnings forecast 11.7% to 52.2p a share. Adds there's a possibility Abcam will increase its dividend. Has add rating and 1510p target price. Shares flat at 1370p ([email protected]) 0826 GMT [Dow Jones] Experian (EXPN.LN) deserves a re-rating, says Evolution Securities. "It has delivered the highest level of organic growth for three years, beating consensus expectations of 3-5% and provides a firm footing for confidence in management's mid-single digit organic growth target." Evolution says organic growth rates have accelerated in all regions. Retains buy recommendation and 767p target. Shares +2.5% at 649p. ([email protected]) 0811 GMT [Dow Jones] Evolution Securities Thursday upgrades Hamworthy (HMY.LN) to add from neutral and target to 350p from 325p after the announcement of a GBP50M contract for ship design and cargo handling systems for eight LPG tankers. Evolution says there is no doubt that this contract should mark the bottom of the market as far as backlog decline is concerned. Evolution also notes the company's comments on encouraging signs of increasing activity in the offshore and marine markets. Shares unchanged at 307p. ([email protected]) 0654 GMT [Dow Jones] Electrocomponents' (ECM.LN) update shows performance has strengthened since the last update in May, with revenue up 24%, says Shore Capital. Notes within this figure the UK grew by around 12% and says this is very encouraging. Adds electronics was the best-performing category. Shore anticipates further upgrades to consensus forecasts post this strong report. Has buy rating on the stock. Shares closed Wednesday at 237p. ([email protected]) Contact us in London. +44-20-7842-9464 [email protected] 0653 GMT [Dow Jones] KBC Peel Hunt cuts Mothercare (MTC.LN) price target to 550p from 620p following the company's 1Q update. Mothercare's UK performance is weak against tough comparatives, as expected, notes KBC Peel. However, the brokerage notes international growth remains strong, while Direct to Home is also robust. KBC Peel says the group continues to offer strong growth prospects for the medium term. However, with UK trading set to undermine profit growth, the brokerage thinks the shares may struggle to hold ground. Hold rating. Shares closed Wednesday at 552p. ([email protected]) 0651 GMT [Dow Jones] Thursday's French and Spanish supply will complete this week's heavy issuance schedule, with up to EUR9.8 billion of French BTANs and inflation linked bonds plus up to EUR3 billion Spanish 15-year bonds. Digestion of the French supply will be helped by EUR3.6 billion coupon payments, which settled earlier in the week. The auctions are expected to go well, with concession built into these bonds. 10-year European government bond yield spreads are relatively stable, with France/Germany unchanged on the day at +34.5 bps, Spain/Germany unchanged at +199 bps, Italy/Germany 1 bp wider at +148.5 bps, Portugal/Germany unchanged at +298 bps, Ireland/Germany unchanged at +289 and Greece/Germany 2 bps tighter at +777 bps. ([email protected]) 0651 GMT [Dow Jones] Spanish government bond 4.65% July 2025, on auction Thursday for EUR2Bln-EUR3Bln, is cheap on the yield curve, and there does appear to be some concession ahead of the auction, says Citigroup. The bank recommends a switch for investors to the July 2025 bond from domestic peer 4.8% January 2024. Results are due between 0830 GMT and 0845 GMT. ([email protected]) 0651 GMT [Dow Jones] Goldman Sachs takes contrarian view on India's liquidity, says banking system cash likely to remain tight through current fiscal year. "Therefore, the effective policy rate, we think, will remain the repo rate for the foreseeable future. This is in line with past tightening cycles." Notes, interest rate hikes tend to be more effective when liquidity is tighter, so RBI would prefer policy rate to be repo rate. Says, calculations show broad money growth for FY11 likely at 15.1%, much lower than the RBI's projection of 17%. Says, "underlying our view of liquidity tightness is the economic outlook that domestic demand will remain strong compared to external demand." House expects another 75 bps in rate hikes in 2010. ([email protected]) 0650 GMT [Dow Jones] The dollar is little changed from where Europe left it last night despite a run of disappointments overnight. The FOMC delivered a very dovish set of minutes that showed some members thought it worthy of considering more easing. The Dow reacted by ending flat on the day and the Nikkei followed up with a 1.1% drop, sentiment not helped by a string of below forecast data from China. With no European data on offer Thursday, equities are likely to offer a guiding light and with Europe looking at a negative open the risk currencies may find in hard to break new ground. ([email protected]) 0647 GMT [Dow Jones] Singapore stocks still under water but losses minimal. STI off 0.3% at 2943.53, likely to close above this week's current low of 2914. Market breadth at almost 2 decliners for each gainer. "External issues will continue to dictate near-term market trends. Uncertainties over the euro and concerns over global economic growth could dampen risk appetite," says UOB KayHian; "nevertheless, we see opportunities to cherry-pick quality stocks with specific share price catalysts." Cites banks, office landlords, most telcos as favorites. Overall volume light, driven mostly by small caps such as Z-Obee (D5N.SG), off 2.3% at S$0.42, Asia Food & Properties (A26.SG), +1.7% at S$0.60, Bund Centre Investment (LJ1.SG), +1.7% at S$0.61, United Fiber System (P30.SG) +11.1% at S$0.05. ([email protected]) 0646 GMT [Dow Jones] The installation of BP's (BP.LN) capping stack device is an important step in rehabilitating the stock and the focus will now shift to paying damages says Citigroup. "The quantum of penalties and punitive damages that BP is forced to pay is key since they are not tax deductible." Citigroup argues that the market continues to discount the higher end of potential fines. Meanwhile, it says BP remains well capitalized and liquid enough to deal with the consequences of the spill. Keeps buy recommendation and 590p price target. Shares closed Wednesday at 401.0p. ([email protected]) 0641 GMT [Dow Jones] India government bonds off day's highs but still above last close after a small uptick in weekly primary article inflation data, says dealer with state-run bank; benchmark 7.80% 2020 bond at 101.18, 101.21 before data, 101.14 at Wednesday's close. "The central bank's INR130 billion auction on Friday is...weighing the market," says dealer. Tips benchmark bond to trade in 101.10-101.30 range in session. Wholesale price index for primary articles in India +0.1% to 306.2 in week to July 3, from provisional 306.0 in previous week. Prices of primary articles +16.25% on year from +16.08% in week to June 26 while on-year inflation rate for food articles was 12.81%, from 12.63% in week to June 26. Fuel index was 14.27% higher from a year earlier, government data showed. ([email protected]) (MORE TO FOLLOW) Dow Jones Newswires July 15, 2010 07:33 ET (11:33 GMT)