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Broker Roundup Pt 1 including Genel Energy, Kesa Electricals, Pearson, BAE Systems and Rolls RoyceJanuary 20 2012, 11:50am
Oil producer Genel Energy (LON:GENL) is rated 'overweight' with a target price of 1,200 pence by City heavyweight JP Morgan Cazenove.
It comes after an analyst visit to Turkey and the Kurdistan. The investment bank says if a decentralised, federalised Iraq is formed, then a commercial export route for Kurdish oil explorers could ultimately be created.
"The political situation in Iraq has deteriorated since the departure of US troops at the end of 2011, and we believe that a decentralised, federalized Iraq looks like an increasingly feasible outcome," analyst Jessica Saadat pointed out.
She added that despite the political noise, catalysts in coming months for Genel are the expected results from the Ber Bahr well in the second quarter of 2012, which could add 179 pence to core net asset value (NAV) and an updated competent persons report on the Taq Taq field, also in the second quarter.
Also on the cards is a potential move to a premium UK listing -targeted for the first half of 2012.
Genel was formed from the union of Vallares with Turkey’s Genel to create the listed oil explorer.
Conversely, Kesa Electricals (LON:KESA) is given an 'underweight' rating by the investment bank after it posted what JP Morgan Cazenove called a weaker than expected Q3 statement yesterday.
Analyst Gillian Hilitch highlighted the extent of the weakness in the French electricals market and said while like-for-like growth in other regions had been stronger than expected, gross margin had continued to suffer.
Despite better trading in the run-up to Christmas, a poor sales period left overall like-for-like revenues slumping at the company 14.5 per cent between November 1 and January 8.
Elsewhere, after a strong full year update for Pearson (LON:PSON), JP Morgan Cazenove now expects the company to deliver a more than 1.8 per cent increase in organic revenue growth for full year 2011.
Before today, the investment bank, which rates the stock 'overweight', had expected 83.2 pence adjusted EPS, broadly similar to consensus expectations.
Yesterday, the FT publisher said it did well in the important year-end selling season and now expects its full year results to show a 10 percent improvement in earnings compared to the 77.5 pence per share posted in 2010.
Meanwhile, Wall Street bank Citigroup has upped its price target on golabl defence and security giant BAE Systems (LON: BAES) to 340 pence per share from 300 pence to reflect a less bearish view on US defence and revised valuation.
It also noted that Citi's strategists foresaw dividends becoming an increasingly important component of total investor returns, with the company's consensus 2012 earnings estimates yield being the 11th highest in the FTSE100. Citi rates the stock a 'buy'.
Rolls Royce (LON:RR.) is the 'most attractive' aero engine stock in Europe, says City heavyweight Goldman Sachs, which reiterated its "conviction buy" rating.
Analyst David Perry said he expected very strong top-line growth over the next few years driven by a significant ramp up in the production of long-haul aircraft and strong investment in the offshore oil and gas.
"RR’s CEO John Rishton has made clear his focus will be “customers, better cash generation and cost reduction” in 2012 and beyond," he added.
Goldman added that many investors believed the firm looked expensive compared to its closest peer Safran, but on Goldman's 2012-13 adjusted estmates the opposite is true, it said.
Also, investors like the aero engine sub-segment, but have near-term
concerns on Safran (neutral) and diesel engine provider MTU (conviction list buy) as they are publicly considering sizeable near-term acquisitions, said Goldman.