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Broker Round-up: Associated British Foods, Antofagasta, BP, Majestic Wine, Reckitt Benckiser

Associated British Foods (LON:ABF) can no longer rely on booming sales growth at budget clothing retailer Primark to drive the shares higher.

That’s the view of broker Nomura, which said a peak in life-for-like (LFL) sales growth could be round the corner, serving up investors a “dose of reality” after a storming run.

Analyst David Hayes said: “While we do not doubt the brilliant brand and positioning developed by Primark, we see these higher levels of LFL growth in the past six months as flattered by the company choosing to pass on a large part of the favourable cotton prices and FX rates that would have benefited the ABF P&F [profit and loss] over these months.”

The broker downgraded the shares today to ‘reduce’ on the grounds that there will be less profitability from Primark, as well as from the sugar division.

Hayes’s target price of £16.50 falls below the current market price of £17.61.

JPMorgan Cazenove gave miners a boost on Monday as it closed its longstanding short position on commodities.

The mining sector is down around 20% in 2013 and close to its 2008 lows, but the broker thinks the tide could be about to change.

Miners might be given the benefit of the doubt with their cost-cutting drive, but the losers remain in mining services, it said.

One stock to look at is Antofagasta (LON:ANTO), according to UBS, which lifted its recommendation to ‘buy’.

The share price weakness of late offers investors a good entry point to the copper miners’ story.

Antofagasta’s fall comes despite copper faring better than other commodities, the Swiss broker points out.

“ANTO is well positioned in the current uncertain market, being low-cost with a net cash position and conservative management,” said mining tipster Myles Allsop.

“ANTO remains committed to its organic growth strategy, though it has changed its focus near term on de-bottlenecking Los Pelambres and Esperanza, as well as the Antucoya project. We believe the de-bottlenecking could add over 50p to our NPV [net present value]. 

He continues: “Longer term, ANTO has the potential to more than double production, with the Centinela district projects potentially adding a further 225p to our NPV.”

Energy stocks were also lifted to ‘overweight’ in JPMorgan’s note on equity strategy. Oil giant BP (LON:BP.) is among the top picks on both JPMorgan’s and Jefferies’ list of oil shares to own.

The latter upped its target price by 50p to 500p, making it a ‘hold’ as its cash flow prospects are offset by uncertainty over the amount it will have to shell out in the Gulf of Mexico spill case.

Investec topped up its target price on wine retailer Majestic Wine (LON:MJW), whose profits rose last year despite a sales decline.

The broker has a ‘buy’ rating and 495p target on the shares now.

A healthy write-up from City analysts helped Reckitt Benckiser (LON:RB.) shares rise on Monday.

Citigroup had a ‘buy’ recommendation on the consumer goods company.  

“We also think RBP is under-valued by the market, particularly in light of its early resilience to the recent entry of generic competition in the US Suboxone market,” it said.

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