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Broker Roundup Pt 1 including McBride, SABMiller, Genel Energy, Xstrata, Rio Tinto and easyJet

January 26 2012, 12:07pm

Household goods provider McBride (LON:MCB) has been upgraded to 'buy' from 'neutral' by Goldman Sachs analysts.

They say the firm's current valuation is unjustified and presents a buying opportunity, given the City heavyweight's expectation of improving earnings and cash returns for the stock.

"However, we remain mindful of the longer-term outlook given McBride’s vulnerable position in a supply chain that is at risk from a structural squeeze on margins following Tesco’s recent announcements," said Goldman, which targets a price of 136 pence for McBride shares.

Investment bank Goldman also says SABMiller (LON:SAB), which makes Grolsch, Peroni and bought Foster's Group last year, is still the best positioned brewer and drinks firm on its consumer staples card and reinstates its 'buy' rating on the stock.

SABMiller will release a fourth quarter 2012 trading statement on April 19 this year, added Goldman, which expects the statement to demonstrate continued robust volume and revenue growth.

"We continue to view SABMiller as the most attractive strategic asset within the sector," said analyst Mitch Collett, which targets a price of 2750 pence for the firm's shares.

Also in a note today, Goldman said it viewed positively Kurdistan focused Genel Energy's (LON:GENL) asset base - a view reinforced by an analyst visit last week.

"We believe that, with capital markets tight, the company has the ability to undertake accretive deals with its large cash reserves. In the short term, we believe the political situation is likely to remain volatile but we see potential for commercial exports in the future," commented Christophor Jost.

Genel was formed from the union of Vallares with Turkey’s Genel to create the listed oil explorer.

Wall Street bank Citi has downgraded miner Xstrata (LON:XTA) to 'neutral' from 'buy' and reduced its target price to £12 from £13.50.

Analyst Heath R Jansen said the diversified mining firm was now trading at a 20 per cent price/earnings ratio against that of giant Rio Tinto (LON:RIO) and a 10 per cent  premium to BHP Billiton (LON:BLT), while the returns profile did not support this premium. Hence, the downgrade.

Citi said its own analysis of the mining companies suggested that Xstrata had underperformed its peers in recent years and while it believed this would change in future, 2012 was likely to be a 'challenging' year for the company.

Elsewhere, Investec released a note on budget airline easyJet (LON:EZJ) today, which unveiled first quarter results, and rates the stock a 'buy'.  The broker has also increased its target price to 500 pence compared to 456 pence previously.

Today, the firm said easyJet revenues rose 16.7 per cent in the quarter while traffic rose by 8. 1 per cent.

"easyJet Q1 revenues rose 16.7 per cent, comfortably ahead of consensus. Both unit revenues and unit costs are ahead of our forecasts," said analyst Andrew Fitchie in the note.

The broker said as a result, it saw a 9 per cent upgrade to full year consensus.

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