Broker tips: Tesco, Lamprell, Ashtead

Date: Monday 11 Jun 2012

Nomura has reiterated its buy recommendation and 430p target price for supermarket giant Tesco, saying that while still early days, there was 'incremental progress evident' in the group's first-quarter statement.

"Although Tesco’s recovery to a market rate of growth remains work-in-progress, we believe it has succeeded in stabilising its underlying LFL at -1% post-Christmas and is beginning to close the gap relative to the market. Q2 should also see over 100bps of Jubilee benefit," Nomura said.

Investec has halved its target price for energy markets-focused engineer Lamprell from 200p to 100p following last week's profit warning.

"A second profit warning in three weeks suggests the company has not got a handle on its fixed price contract execution strategy. We believe management are tainted by a track record of cost overruns and poor profitability. The margin impact due to rig delays is likely to drag into 2013 and even beyond," Investec said in a research note on Monday morning.

Analysts said that the stock is likely to continue reflecting these concerns to trade at a "significant discount" to its peers. The broker reiterated its hold rating on the shares, highlighting its preference for Cape (buy) as a recovery play.

Jefferies has reiterated its buy rating and 300p target price for FTSE 250 rental equipment firm Ashtead ahead of its full-year results next week, saying it sees upside risk to current-year forecasts.

"We see upside risk to FY13 forecasts from 1) ongoing structural shift to increased rental & less equipment ownership in North America 2) Pricing recovery in rental rates and 3) Ashtead gaining market share from smaller, more financially constrained peers."

BC

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