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The Expert View: Barclays, Babcock and Lamprell
by Harry Brooks on Mar 22, 2013 at 05:01
A roundup of some of the best analyst commentary on shares, also including AG Barr and Beazley.
Our daily round-up of analyst recommendations and commentary, featuring Barclays, Babcock, Lamprell, AG Barr and Beazley.
Barclays promoted to Investec's top pick
Barclays (BARC.L) has displaced Standard Chartered to become Investec analyst Ian Gordon's top pick in the banking sector.
'Of course, despite provoking further unflattering headlines yesterday, Barclays is not ''in crisis'' at all,' Gordon said. Barclays stands accused of attempting to bury news of the £40 million it paid its top bankers in bonuses by releasing the figures while the City was distracted by the Budget.
'Investors should be reassured by the ''comfort blanket'' on current trading issued by CEO Antony Jenkins earlier this week and seize the opportunity to buy in,' Gordon said. 'Barclays is hereby promoted ahead of Standard Chartered (Buy) to become our top pick!'
The head of Barclays' investment banking division, Rich Ricci, did particularly nicely: he was awarded £17.6 million worth of shares, and Wednesday's scrapping of the 50p top rate of tax will see him pocket an extra £27,149 from his salary of £700,000 from next month.
Shares in the group closed at 295.2p on Thursday, virtually unchanged from Wednesday's close.
Babcock International 'oozing confidence'
Engineering support services group Babcock International (BAB.L) is 'oozing confidence' at the moment, giving Berenberg Bank analyst Simon Mezzanotte plenty of faith in his 'buy' recommendation.
A presentation by Babcock’s CFO, Bill Tame, on Tuesday emphasised the three key attractions of the company, Mezzanotte said:
- The environment for outsourcing in the UK remains benign
- Babcock is a one-of-a-kind among UK outsourcing companies
- The company enjoys excellent visibility thanks to the recent surge in bid pipeline
'Despite our estimates being 6-7% above consensus, we still see material upside risk to our estimates,' Mezzanotte said. 'In the scenario of a contract win ratio of one in three (the company’s historical average), we estimate that organic growth could average 14% over the next two years.'
Shares in the group closed at £10.73 on Thursday, down 26p or 2.4%.
Merrill Lynch lifts target price for Lamprell
Merrill Lynch analyst Fiona Maclean has increased her target price for Lamprell (LAM.L) in spite of an annual update that bore the scars of a tough year for the oil and gas industry engineer.
Lamprell posted a loss for the year of $110 million, prompted by cost overruns and penalties on key projects. The group was hit with a £2.4 million fine by the FSA on Monday for failing to tell investors about its deteriorating financial position early last year.
Nonetheless, Maclean said the fact that the update didn't contain any further nasty surprises was a positive. 'We believe that the key message to take away from Lamprell's results this morning is that following a most challenging year, for the company to be able to deliver on its November profits warning with little deviation is a very positive result,' she said.
'With our increased confidence will expand the multiples we apply to the price objective, which rises to 180p from 140p, and with 27% upside potential we maintain our buy rating.'
Lamprell is a corporate client of Merrill Lynch.
Shares in the group closed at 145p on Thursday, up 3.8p or 2.7%.
Shore Capital downgrades AG Barr on share price strength
The share price of AG Barr (BAG.L) looks to be up with events, according to Shore Capital analyst Phil Carroll, who has downgraded the Irn-Bru maker from 'buy' to 'hold'.
Full-year results showed pre-tax profits up 4.3% to £35 million compared with Carroll's forecast of £33.3 million, and earnings per share increased by 10.9% to 24.7p, beating his 21.8p forecast.
'This represents a commendable performance in our view given the extremely challenging market conditions,' Carroll said.
Nonetheless, Barr's no longer looking like a 'buy' to the analyst. 'Despite what we believe has been a robust performance in 2013, we believe Barr's valuation is a premium that is now up with events, even taking into account the possibility of the merger going ahead at a later date and potentially some small upgrades. Therefore, we downgrade our buy recommendation to hold.'
Shares in the group closed at 539.5p on Thursday, up 19p or 3.7%.
Cyber liability: the next big thing for Beazley?
Specialist insurance firm Beazley (BEZG.L) stands to gain from the rise in cybercrime, according to Westhouse analyst Joanna Parsons, who has an 'add' recommendation on the shares.
'A recent report by Marsh about the substantial increase in demand for cyber insurance by its US clients (+33% year on year) is positive news for Beazley’s Breach Response product,' the analyst noted. Insurers have been selling policies to protect against hacking attacks for more than a decade now, but the threat has really risen to prominence in the past few years following some highly visible attacks.
'Whilst this is still a relatively small class for the group, (c.4% of 2012 premiums), we see the growth potential as very interesting. In our view, demand for cyber insurance will just continue to develop as morecountries adopt tighter regulation around data/privacy, plus it is another example of Beazley being at the forefront of innovation in its specialist lines.'
Shares in the group closed at 211p on Thursday.