Broker tips: Aberdeen Asset, RPS, Fullers

Date: Thursday 04 Feb 2010

New business flows at Aberdeen Asset Management were at record levels in the company's first quarter and are primarily coming from new US clients piling into global equity funds, Singer Capital Markets revealed after meeting with the asset manager’s top brass on Wednesday.

‘Whilst outflows continue from lower margin fixed income funds, since the end of the quarter Aberdeen are still seeing very strong flows into equities,’ Singer said.

‘Aberdeen is trading on 12x [earnings] and yields 5%. With reducing leverage and continued strong momentum in equity flows combined with signs of slowing outflows in fixed income the shares at 125p represent good value in our view,’ Singer concluded.

Panmure Gordon is keeping its ‘sell’ recommendation for environmental consultant RPS after Thursday’s trading update, on the grounds that the company remains expensive compared to its peers.

The broker sees earnings remaining under pressure for the foreseeable future. ‘With public sector work accounting for c40% of its business, and budgetary pressures likely to intensify from here, we do not believe RPS will escape this,’ Panmure analyst Mike Allen predicts.

The company also does a lot of consultancy work for the oil exploration trade and Allen thinks the situation here is also cloudy. ‘Oil demand and the pipeline for future projects is also likely to be driven in part by the global economic performance, which also looks uncertain for now.’

The stock trades on 11.7 times Panmure’s estimated fiscal 2010 earnings per share (EPS) and a multiple of 7 times enterprise value/earnings before interest, tax, depreciation and amortisation. ‘This is a premium of in excess of 40% on both counts to the UK Engineering Consultancy sector, which we believe is too rich,’ the broker said.

Panmure Gordon thinks a target price based on nine times expected 2010 EPS is realistic, though it concedes that this price/earnings ratio would be at the lower end of RPS’s historical range. On this basis, the broker has a price target of 143p.

Broker Charles Stanley has upgraded its 2010 and 2011 profit forecasts for Fuller, Smith & Turner after the London based brewer and pubs group released a ‘confident’ interim management statement.

‘We are upgrading our FY10 and FY11 forecasts by £0.6m and £0.4m respectively to reflect the continuing strength in the LfL [like for like] sales performance even through Q3,’ said Charles Stanley analyst James Dawson.

The broker has retained its ‘add’ recommendation and left its price target unchanged at 600p.

Panmure Gordon is also raising a glass to the London Pride brewer, and has lifted its price target to 614p from 585p.

The broker has also boosted its 2010 and 2011 profit forecasts. ‘We have increased our FY 2010E [2010 estimated] PBT [profit before tax] by 5.5% to £25.8m (32.4p EPS [earnings per share]) and our FY 2011E [2011 estimated] PBT by 5.5% to £27.1m (EPS 34.0p),’ Panmure analyst Simon French said.

Panmure Gordon rates the shares a ‘buy’, saying the company deserves to trade on a small premium to rivals Greene King and Marston’s.

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