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Broker Spotlight brings some of the more intriguing and topical analyst coverage to centre-stage. The daily column aims to illuminate thoughts and opinions behind the big stories. London is one of the financial capitals of world. The influential and closely followed views of its analysts regularly move markets and split opinion. The Broker Spotlight column arms Proactive readers with the added insight from the often colourful thoughts and headline-grabbing valuations from the City’s analyst community.
Broker Round-up Part 1: InterContinental Hotels, Premier Foods, AstraZeneca, Weir Group and BSkyBAugust 08 2012, 12:46pm
JP Morgan Cazenove thinks there no point checking into InterContinental Hotels (LON:IHG).
There are no more short-term catalysts from the Holiday Inn owner, according to the heavyweight broker.
Yesterday, shares lifted as brokers were upbeat on the company’s promise to return US$1 billion to shareholders, but JP Morgan isn’t so optimistic today.
“While we continue to believe in the long-term growth potential of the company, given the lack of short-term catalysts and strong recent share price performance, we downgrade to Neutral,” said analyst Komal Dhillon.
Despite downgrading the stock from ‘overweight’, he pushes up his target price to 1,700 pence from 1,640 pence.
UBS thinks Premier Foods (LON:PFD) is doing all the right things but suggests the debt laden company, behind Hovis bread and Mr Kipling cakes, might be “accelerating into a strengthening headwind”.
With branded sales “barely moved” in the first half of 2012 and with the operating environment “still very challenging”, the broker questions how cash generative the business will be after 2013.
“In our view the current valuation represents too big a leap of faith,” said UBS, which lowers its target price by 30 pence to 70 pence a share.
Shares slipped 3.6 per cent to 69.9 pence.
“Even then we believe that it will take a surprise from the R&D pipeline or incremental bolt-on acquisitions to change market perceptions of the company,” said analyst Jeffrey Holford.
He is concerned about the company’s revenues, while he was not impressed by the acquisition of Amylin on valuation grounds.
“We need to see better decision making in both business development and R&D before reviewing our opinion on the shares,” Holford concluded.
The broker, with its ‘buy’ recommendation and 1,715 pence target price, says that organic growth prospects provided by the medium structural growth drivers continue to be compelling.
The broker adds 50 pence to its target price accordingly, taking it to 850 pence.