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Broker spotlight: Barclays, M&S, AIM, Meggitt, Provident Resources...

Last updated: 11:41 27 Jun 2014 BST, First published: 10:41 27 Jun 2014 BST

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Barclays (LON:BARC) figured heavily following the civil action from the New York Attorney General over its US dark pool operation.

As the name implies, dark pools are not designed to be easy to follow and there was uncertainty today over what possible sanction lies ahead for the scandal–prone bank

Citigroup said Barclays must respond to the summons within 20 days and will face a fine if there is an error or a violation. 

The broker points out that the dark pool business is negligible for Barclays – at only 0.1% of group revenues – so if the size of the fine is proportional it should be an immaterial hit to the overall business and revenues.

The concern it said: “Is that it is no longer clear whether the fines being levied in the US are proportionate and reasonable to the observed damages.”

It cannot agree a settlement, Barclays could appeal to the Federal District Court.

Jefferies meanwhile believes the £2.5bn sell off in Barclays share yesterday shares over-discounts the risk of the civil suit. 

“Though such outcomes can clearly be binary, the risk to Barclays seems more about business impact than magnitude of potential fine/settlement,” it said. 'Buy' with a 325p price target remains it view.

Elsewhere, Canaccord says that Standard Chartered’s (LON:STAN) pre-close statement guided to income being down mid-single digits, costs up slightly over last year, impairments up by a high-teens percentage, and operating profit down 20%.

With margins under pressure and impairments rising, sell is its view with a price target reduced to 1,000p from 1,200p. 

Marks & Spencer’s (LON:MKS) remains in Goldman Sachs’ crosshairs with further earnings pressure on the way says the broker as the food business experiences escalating UK competition.

With structural issues still in clothing, Goldman sees earnings in 2017 at 26% below consensus. A conviction list sell, it concludes.

Defence group Meggitt (LON:MGGT) also attracted some red ink as UBS cut its rating to ‘neutral’ from ‘buy’ and lowered its 2014 earnings forecast by 5% due to currency headwinds.

“We are forecasting a further 1% cut to EBITA and EPS from 2015 as the hedges run out and Meggitt is hit by transaction headwinds,” it added.

Liberum, meanwhile, notes that the AIM 100 is the worst performing FTSE UK index this year so far but it still has a number of key buys including property group Conygar (LON: CIC), motor group Vertu (LON:VTU), recruiter Staffline (LON:STAF) and oil producer Circle Oil (LON:COP).

Provident Resources (LON:PVR) shares have been hit by lack of progress of a farm-out of the company’s flagship Barryroe prospect in the Celtic Sea. 

Cantor Fitzgerald still sees considerable upside potential at Barryroe, with the oil bearing Purbeckean and Lower Wealden intervals yet to be tested. 

Using a 25% recovery factor on current management estimates, these two intervals could generate an additional 195 mln barrels oil recoverable – some 63% above current confirmed third party estimates. 

In addition, there is undrilled potential in the Jurassic. On this basis, Cantor has maintained  a ‘buy ‘ recommendation and 969p target price.

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