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Vedanta and Petrofac top broker's buy recommendations

Vedanta, Petrofac and Kingfisher feature in a list of European share recommendations published by analysts at Liberum Capital.

 
Vedanta and Petrofac top broker's buy recommendations

Vedanta, Petrofac and Kingfisher feature in a list of European large cap recommendations published by analysts at Liberum Capital today.

The broker saw the biggest return from Vedanta Resources (VED.L) over the next six to 12 months, predicting a 92% increase in the company's share price to £34.00 and an earnings per share ratio (EPS) rise of 19% by 2014.

The London-listed mining group recently got the green light from the Indian government to buy a 30% stake in oil and gas explorer Cairn India, a deal Liberum thinks will add 7% to the net present value.

The oil and gas services provider Petrofac (PFC.L) was another strong pick, with shares predicted to rise 44% from £14.01 to £20.20. The broker saw huge market potential and limited competition for Petrofac’s new division, Integrated Energy Services, which will work with National Oil Companies (NOC) on smaller gas and oil fields.

Liberum decided that shares in retail giant Kingfisher (KGF.L), owner of B&Q and Brico Depot, were undervalued at 252p and predicted a 33% price rise. A combination of steady demand and the retailer’s dominant market share explained a confident forecast of 17% average EPS growth over the next three years with cash generation of £400 million each year.

For the more defensive investor, Liberum saw a steady 18% growth in National Grid (NG.L)'s shares, which are currently trading at 597p. The utility is set to benefit the most from £30 billion investment in the UK’s electricity transmission network.

Johnson Matthey (JMAT.L), the specialist chemicals company, was another long term pick with potential for a 22% share price rise. The company's expertise in the heavy duty diesel (HDD) emissions control business is predicted to add 60% to underlying earnings over the next four years as new regulations come into force.

Liberum's list also contains a trio of French companies. Cosmetic giant L’Oréal’s recent strong performance, currently trading at €84.80, was driven by share gains in the key emerging markets of China and Brazil. With a burgeoning US recovery set to boost consumer spending, L’Oréal is well positioned to increase its share price by up 25%, according to Liberum. Another French company benefiting from emerging market exposure is construction materials firm Saint-Gobain. The analysts predict a 40% rise in its share price driven by an anticipated 10% annual growth in emerging markets sales. Vivendi, the French international media conglomerate, was highly recommended with an 81% forecasted rise in share value.

Finally, Liberum’s analysis showed that profitability in the pharmaceutical business was underestimated and it chose the Swiss multinational Novartis as its buy pick. The firm’s proven pipeline delivery and high quality non-pharmaceutical businesses are expected to boost its share price by 37%, up to 66 CHF, over the next 12 months.

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  • Vedanta Resources PLC (VED.L)
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  • Petrofac Ltd (PFC.L)
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  • Kingfisher PLC (KGF.L)
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  • National Grid PLC (NG.L)
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  • Johnson Matthey PLC (JMAT.L)
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