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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: Lloyds, HSBC, Wolseley, Premier Farnell and Anglo American
June 18 2012, 12:22pmLloyds Banking Group (LON:LLOY) was dubbed a “stable, attractive, high-return business” by broker UBS today.
The part state-owned bank has been promoted to the Swiss bank’s key calls list, joining the likes of Aggreko (LON:AGK), AstraZeneca (LON:AZN) and Prudential (LON:PRU).
Lloyds is also at the top of the broker’s list of UK bank stocks, with a ‘buy’ rating and 50 pence target price.
UBS analyst Nick Nelson signalled the more “constructive approach” from the UK authorities as a reason for optimism for the UK banking sector.
Nelson also sees the potential for it to deliver meaningful returns to its shareholders through dividends, share price appreciation and capital return.
He said that on a stand-alone basis the stock should be valued at a premium to book value.
Shares in Lloyds shed 0.7 pence or 2.3 per cent today to stand at 30.6 pence.
Daniel Stewart reckons however that a switch from Lloyds (LON:LLOY) to HSBC (LON:HSBA) would make sense given that Lloyds and its subsidiary Halifax have raised mortgage rates over the last couple of months.
HSBC on the other hand is underwriting mortgages for first-time buyers at a rate of 60,000 per annum which could represent a market share of more than 10 per cent this year, twice its natural market share.
“With the better news on Greece, last week’s more positive news on UK bank regulation and the more encouraging Q1 figures, the stock looks fundamentally very cheap,” said Daniel Stewart analyst Simon Willis, who upgrades the stock to ‘buy’ with a target price of 650 pence.
Citigroup said a year ago that Wolseley (LON:WOS) could be worth up to 4,500 pence a share.
Today, its analysts now estimate the world’s leading supplier of heating and plumbing products could actually be worth as much as 5,000 pence by 2015 with a little help from market conditions.
With more confidence about the margin potential, market share gain opportunities and the benefit of balance sheet options, Citi analyst Clyde Lewis reckons the world’s leading distributor of heating and plumbing products could reach the magic mark in just two and a half years.
Although the stock’s been relatively quiet this year having outperformed in the previous two years, the analyst sees the newsflow from margins and the balance sheet driving the stock over the next 12 months.
Shares rose 38 pence or 1.75 per cent today to 2,214 pence.
Barclays Capital has upgraded electronic components supplier Premier Farnell (LON:PFL) to ‘overweight’ from ‘equal-weight’ as it is trading at the bottom end of its historical range.
Analyst Jane Sparrow said: “While the macro uncertainty is likely to lead to continued volatility in the share price, we believe the worst is over in terms of share price performance.”
The dividend yield of 6.5 per cent also offers some support at current levels, capping the downside, she added.
Sparrow’s target price of 213 pence, cut from 235 pence today, still implies 30 per cent upside to the current price of 163.6 pence, down 0.6 per cent today.
UBS chopped mining giant Anglo American’s (LON:AAL) target price from 3,100 pence to 3,260 pence today, but remains a ‘buyer’ on value, highlighting the growth pipeline, late cycle diversified commodity mix and further potential savings.
