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Broker Spotlight – Tesco, Berkeley, Barratt, Britvic, Globo, Constellation Healthcare...

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UK's housing market is in the early stages of recovery, says JP Morgan Cazenove
The honeymoon looks to be over for Tesco’s (LON:TSCO) chief executive Dave Lewis following the latest market share numbers from Kantar Worldpanel.
 
JP Morgan sharpened its pencil this morning and cut its earnings estimates by 5% for 2016 and 2017 and its price target to 175p from 185p before.
 
JPM says Tesco’s volumes are declining 2.5% LFL and it has not been able to sustain the improved trading momentum initiated in November. 
 
As a result, Tesco has is losing market share again  something that  coincides with a more consistent trading performance at the discounters, who continue to gain market share from the Big Four.
 
Stay ‘underweight’ Tesco is JPM’s view.
 
As London investors prepare to acquaint themselves with soon-to-float builder Cairn Homes, in a €350-400mln IPO, City firm JP Morgan Cazenove has upgraded the sector.
 
The investment bank repeated ‘buy’ recommendations for Berkeley (LON:BGK), Barratt Developments(LON:BDEV), Bovis (LON:BVS) and Bellway (LON:BWY) while Persimmon (LON:PSN) and Redrow (LON:RDW) retain ‘neutral’ ratings.
 
All, however, saw their price targets increased by JPMC analyst Emily Biddulph who says the UK housing market is in the early stages of recovery.
 
“A benign land market has been the key driver of this cycle; it’s our view that this doesn’t change anytime soon and therefore high margins are sustainable over the medium to long-term,” the analyst said in a note.
 
Elsewhere, UBS downgraded FTSE 250 constituent Morgan Advanced Materials (LON:MGAM) to ‘sell’ from ‘neutral’, and cut Spectris (LON:SXS) to ‘sell’ from ‘hold’.
 
UBS also cut hydraulic engineer Rotork (LON:ROR) to ‘neutral’ from ‘buy’. Numis Securities, meanwhile, moved its view of Rotork to ‘add’ from ‘hold’, though mining titan Glencore (LON:GLEN) was upgraded to buy from hold with a 12 month target of 330p.
 
Soft drinks group Britvic (LON:BVIC) is a ‘buy’ according to HSBC which has now begun its coverage of the stock with a 875p price target.
Liberum rates Tate & Lyle (LON:TATE) a ‘sell’ and has reduced its target price to price 505p, from 545p.
 
“Tate continues to trade at a premium to globally diversified peers despite a sustained lack of earnings visibility. In our view, the balance of risk / reward remains insufficiently attractive to turn more constructive.”
 
Mobile app specialist Globo (LON:GBO), however, warrants a re-rating according to RBC. 
 
Latest quarterly results were ahead or matched expectations, said the broker, and importantly Globo has now been able to throw off cash for the last three years and will produce a material amount this year (forecast free cash flow yield of 7%). 
 
Globo trades on forward earnings of just 6.4 times, which is significantly below fair value in RBC’s view, which suggests the shares should re-rate.
 
WH Ireland has started coverage on oil rig contractor Amedeo (LON:AMED) with a ‘speculative buy’ recommendation and 0.75p share price target.
 
Constellation Healthcare (LON:CHT) is still on course for a 43% jump in earnings according to house broker finncap.
 
New client are estimated to deliver US$8.5m sales and US$3m EBITA in a full year, up from US$6-7m sales and US$2-3m EBITA highlighted in April. 
 
The target price remains 280p. 

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