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Broker Roundup Pt 2 including Barclays, SacOil Holdings, Goldstone Resources, Stellar Diamonds, Globo and Probability
Broker Investec said it saw "limited" further near-term upside for Barclays (LON:BARC) and has re-initiated coverage on the banking giant with a new analyst and a 'hold' rating.
The stock has rallied strongly over the past six months, materially outperforming every other UK bank, and it now trades 70 per cent above its September 2011 lows, said analyst Ian Gordon.
But, he added that with, in Investec's view the RoE (Return on Equity)set to recover to only 8 per cent by 2013 estimates, it saw limited near-term upside.
"The time to buy Barclays is when market paranoia is high – not when an overdone feel-good factor is prevalent," said Gordon.
The analyst added that investors, who had had the courage and foresight to buy in over the past six months should lock in some profits in our view.
Gordon targets a price of 240 pence for the stock.
Deutsche Bank rates homebuilder Bellway (LON:BWY) a 'hold' and said it expects to see a slight increase in consensus figures following first half results.
Yesterday, the FTSE 250 firm said growth in house prices will likely slow this year. For the six months to end January, Bellway’s home sales rose five per cent to 2,455 as private home sales surged 15 per cent.
Deutsche said it had a "cautiously upbeat" view on the trading environment and had fine-tuned its forecasts.
It added that it continued to see scope for further upside in gross margins at Bellway, but believed there was better value elsewhere and reiterated its 'hold' recommendation.
The German bank also produced a note today on oil giant BP (LON:BP.), which it rates 'buy' saying the firm's fourth quarter results showed the upstream business was 'stabilising' and it was making "solid progress" downstream.
"Having laid the foundations and started the process of changing culture and approach, the future foundations appear ever more sensibly laid," said analyst Lucas Herrmann.
He said that earnings momentum is more likely a story for 2013 rather than this year.
"A larger than anticipated dividend increase does, however, suggest greater confidence in the future. We continue to see value but, absent the resolution of litigation, suspect it will take time to out."
JP Morgan Cazenove also rates the stock 'overweight' in a note today.
Sticking with oil and gas, conversely, the investment bank has today downgraded Cairn Energy (LON:CNE) to 'neutral' from 'overweight', targeting a price of 385 pence.
It says that although the shares look extremely cheap relative to core net asset value, it struggles to see near term catalysts that could bring about a material re-rating.
Analyst Jessica Saadat said it appeared drilling on Greenland was unlikely before mid 2013/2014 at the earliest and she would rather wait and see how the company would use its cash and regenerate itself as a viable E&P company before taking a more positive stance.
"Although Cairn has a strong cash balance, we believe it will take time to build up an interesting portfolio of assets, with near term drilling potential," she said.
In other coverage today, City broker Seymour Pierce released a note on Homeserve (LON:HSV) - the home maintenance insurer.
The company said today in a trading statement that rectifying issues in the UK business was taking longer than anticipated and it has also decided to cut its workforce by 7 per cent, or 200 staff.
In a note, the broker said that today's statement vindicated its view that the HSV management was too optimistic about the impact of the UK issues.
“We remain negative on the stock,” it said, reiterating its ‘reduce’ rating and target price of 268 pence.
In the smaller caps, SacOil (LON:SAC) said it had agreed changes to the terms of its farm-in partnership for the OPL 281 licence in Nigeria, which mean it does not have to carry the operator on capital expenditure costs to first oil.
It said Transcorp remained operator of the onshore licence and will pay its 60 per cent of the costs to first production, compared to the company and other partner Energy Equity Resources (EER) carrying 100 per cent of the costs as previously agreed.
The house broker Shore Capital welcomed the announcement.
"In our opinion, these revised terms for entry into OPL 281 are a very positive development, as they reduce SacOil’s capital exposure and indicate that the work programme will be expedited under a very credible local operator," said analyst Craig Howie.
Elsewhere, broker Daniel Stewart has chosen two companies from each of its primary coverage sectors - financials, healthcare, leisure, materials, metals & mining, oil & gas and software - as its top picks for 2012.
Africa focused Goldstone Resources (LON:GRL) and Stellar Diamonds (LON:STEL) are the top picks for the metals and mining sector, while in the oil and gas sector the broker prefers Petroceltic International (LON:PCI) and Chariot Oil & Gas (LON:CHAR).
Mobile technology group Globo (LON:GBO) and gaming specialist Probability (LON:PBTY) were the picks in the software sector.
Stellar Diamonds is given a target price of 21p (current price 6.13p) while Petroceltic has a target price of 13.7p (current price 7.78p). Probability has a target price of 132p (current price 76.5p). Goldstone Resources has a target price of 9p (current price 5.75p).
Meanwhile, mobile messaging firm Synchronica (LON:SYNC, CVE:SYN) has agreed to form a joint venture with Toronto based technology incubator Intertainment Media Inc (CVE:INT, OTCQX: ITMFT).
The letter of intent announced today envisages Synchronica and Intertainment Media integrating Synchronica's flagship messaging platform, Mobile Gateway, with Intertainment Media's Ortsbo experiential language technology, enabling Mobile Gateway to provide its users with seamless and real-time translation between more than 50 languages
In a note, Northland Capital analyst David Johnson commented that the partnership provided a 'differentiator' for Mobile Gateway for new and existing multinational mobile network operators and handset manufacturers.
