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Broker spotlight - Centrica, Man Group, William Hill, Land Securities ...

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Centrica’s (LON:CNA) dismal results today came too early for most of the brokers, who were still ruminating on the insight revealed yesterday into the competition investigation currently underway.

Canadian broker, RBC Capital, was an exception and reiterated its prescient ‘underperform’ stance after the numbers.

The negatives it highlighted were the 30% dividend cut and that offers for its combined cycle gas turbine operations were too low to warrant a sale, which the broker said was likely a key factor behind the lower payout.

RBC estimates the shares now yield about 4.8% post the dividend reduction, in line with other utilities.

But with lower earnings forecast for 2015 and challenges on its balance sheet, commodity prices combined with the regulatory investigation and election uncertainty, the share price is still too high, it said. Its new target price is 270p.

Man Group (LON:EMG) has been a strong performer recently and was up again today as Goldman Sachs stuck its considerable bulk behind the hedge fund manager.

The broker’s earnings forecasts for 2014-16 are 12%-26% above consensus, it said, which reflects its view that the second half of 2014 was a point of inflection in the group’s economics. 

“We expect Man Group to generate over US$900mln in post-dividend cash flow over the next five years, giving management further room to generate shareholder value through investing in organic or inorganic growth, or by returning cash to shareholders.”

The rating is upgraded to ‘buy’ (from ‘neutral’) and it joins the broker’s conviction list. The 12-month price target rises to 210p from 185p.

Numis has cut its rating on William Hill (LON:WMH) to ‘hold’ from ‘add’. The broker notes that the bookie is increasing its exposure to online and international markets and, correspondingly, reducing its exposure to retail and the UK, but the potential rewards are already reflected in the share price.

Investors who want exposure to the upside with some protection against the risks should consider being long William Hill and short Ladbrokes (LON:LAD Reduce, 100p).

Societe Generale has upgraded its view on property giants British Land (LON:BLND) and Land Securities (LON:LAND) to buy. 

The French broker expects a similar total return around 9-10% annually over the next three years on the back of lower rates and a new capital recycling scenario.

Target prices rise by 27% on average to 1,030p for British Land and 1,600p for Land Securities.

Elsewhere, in brokerland, broker SP Angel looked at Tertiary Minerals' (LON:TYM) final results from the MB programme in the US.

It said phase 3 drilling programme hasdachieved significant progress in linking together the northern and southern parts of the existing resource area and in demonstrating thicker mineralisation at depth towards the west.

"We look forward to seeing the impact of these results on the magnitude and geometry of the resources."

The same broker looks at Petra Diamonds (LON:PDL), which today raised full-year production guidance after a sparkling set of interim results.

The company now expects to produce around 3.3mln carats in the 12 months to the end of June, up slightly from its previous guidance of around 3.2mln carats.

The broker said: "The growth story remains intact with development progressing well at Finsch, Cullinan and Koffiefontein. The balance sheet remains strong with capex peaking over the next two years. This remains a core buy in the diamond sector."


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