Broker roundup part 1 including Next, Experian, Serco, Compass and Pura Vida


Shares in fashion retailer Next (LON:NXT) were lifted this morning after it lifted profits guidance following a solid end to the year but the analyst community seems to be collectively humming ‘that don’t impress me much’.

The High Street stalwart lifted its full year profits guidance range to £611million - £625 mln, from £590mln - £620mln previously.

Broker N+1 Singer said it saw no reason, given Next’s high relative valuation, to change its ‘hold’ stance on the stock, despite today’s small earnings estimate upgrades. 

Oriel Securities agrees, and is also sticking with its ‘hold’ recommendation.

City firm Seymour Pierce is another broker sitting on the fence when it comes to Next. 

“We believe the company was one of the winners over Christmas helped by a strong range geared to the colder weather. Next is a highly cash generative, tightly run and looks to continue to execute on the basics of giving the consumer great product and capitalising on its leading multi-channel position," says analyst Freddie George.

"However, the sector has performed strongly over the last year and sector rotation is likely to lead to a period of consolidation,” he adds.

Seymour Pierce also today lifts credit rating agency Experian (LON:EXPN) to ‘add’ from ‘reduce’.

A potential spark to life of the US mortgage market is behind the upgrade and the broker cites a front-page Financial Times article on Bank of America’s plans to expand the number of home loans it offers as offering support for this thesis.

Elsewhere, Espirito Santo reckons today Compass Group (LON:CPG) will lose its direction in 2013, while Serco (LON:SRP) is being undervalued by investors.

Number crunchers at the Portuguese broker cut the food services group to ‘neutral’ from ‘buy’ but gave Serco, which provides services to local and national governments,  a boost with an upgrade to ‘buy’.

In other notable coverage, HSBC moves its rating on Thomson operator TUI travel (LON:TT.) to 'neutral' from 'underweight'.

Away from the big caps, analysts welcomed news that Pura Vida Energy (ASX:PVD) is to farm out part of its interest in the 2.7 million acre Mazagan permit off the coast of Morocco.

Plains Exploration & Production, the NYSE quoted oil and gas company, is paying US$15 million to farm in to the company's 75% working interest in the highly prospective exploration play.

It will earn a 52% working interest and will act as operator in exchange for funding 100% of the costs of certain exploration activities.

Broker Argonaut said the farm-out deal was on better terms for Pura Vida than it had expected and rates the shares a buy with a target price of A$2.27, giving massive upside to the current share price of around A$0.82.

Meanwhile, broker N+1 Singer notes that the company is now fully funded for two potentially company-making wells and the news should de-risk its investment case in the eyes of investors.

It is also worth noting that at least five exploration wells are expected to be drilled on and around the permit in 2014,” the broker concluded.

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