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Broker Roundup Part 1 including: G4S, Shell, Premier Oil, Rockhopper Exploration and 888 Holdings


Brokers reacted this morning to the news that security firm G4S (LON:GFS) is expecting losses of up to £50 million on its Olympics contract.

Last week it was revealed the firm is having to draft in 3,500 military personnel to help plug a staffing shortfall.

Credit Suisse reduced its target price for the firm by 10 pence to 300 pence per share, but maintains an ‘outperform’ recommendation, reckoning the business can still grow organically by 7 per cent over the next three years.

UBS has taken a more bearish stance and cut the target price to 280 pence per share from 330 pence and changed its recommendation to ‘neutral’ from ‘buy’.

Analyst Jamie Brandwood said in addition to the immediate security risks posed by G4S’s ailing operation, there is the risk the negative publicity will have on future contracts and growth.

The broker cut its earnings per share forecasts by 9 per cent for the 2013-14 financial year

Brokers Jefferies, Panmure Gordon, Seymour Pierce and Numis all followed suit and reduced recommendations to ‘hold’ from ‘buy’ or ‘add’.

Societe Generale downgraded Royal Dutch Shell (LON:RDSA) after including lower oil prices in its forecast calculations.

The broker downgraded its Brent oil prices by 10 per cent over the next two years to US$105 bbl from US$117 bbl.

Analyst Irene Himona said: “Aside for the argument that its exceptional balance sheet strength provides a safe heaven, we see such a premium as deserved but lacking the catalysts to expand further. 

“Hence, following a long period of relative outperformance versus the sector – albeit also versus peers that suffered major crises such as Macondo – we have downgraded from ‘buy’ to ‘hold’.”

Meanwhile HSBC Research said Premier Oil (LON:PMO) was a “risk worth taking” after acquiring Rockhopper Exploration’s (LON:RKH) Falkland acreage.

HSBC reiterated its ‘overweight’ rating on the stock and upped its target price to 530 pence per share from 455 pence per share.

On the other hand Barclays reduced its recommendation for Rockhopper to ‘equal weight’ from ‘overweight’.

Analyst Alessandro Pozzi said: “In line with Premier's estimates, we are also factoring delayed first oil and a revised resource estimate.

“In addition, given a lack of catalysts over the next 12 months that could lead to a re-rating of the shares, we have applied a 15 per cent discount to our net asset value, reducing our price target to 350 pence from 590 pence.”

Deutsche Bank meanwhile upped the price target for gambling firm 888 Holdings (LON:888) believing first half profits for the year will be “significantly” ahead of expectations. 

The broker said this summer’s wet weather helped increase player activity during the second quarter and as a result is now forecasting first half EBITDA of around US$37 million up from its previous estimate of US$26 million.

The broker gives a ‘buy’ rating on the stock and gave a new target price of 87 pence.


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