Date: Friday 09 Jul 2010
KBC Peel Hunt expects to upgrade its profit forecasts for Michael Page by about 25% for this year and next following the recruiter’s second quarter update, cementing the stock’s position as one of the broker’s top picks in the recruitment sector.“Michael Page's experienced management team, strong cash position and diversification both in terms of sector and geography make it a favourite of ours in the sector. We believe structural international drivers will provide the background for strong growth in the medium to long term and we reiterate our Buy recommendation,” said KBC analyst Henry Carver.
The outlook is improving for the recruiter, though visibility is still low, the broker conceded.
Bovis Homes remains Killik’s favoured pick in the housebuilding sector, after what the broker described as a "solid" first half trading statement.
“In the short term, the group is benefitting from the current surplus of land vendors over land buyers which is keeping land prices attractive. Further out, we believe the group will benefit from strong demand for new homes given the ongoing shortage of homes being built in England and Wales,” notes Jonathan Jackson, head of Equities at Killik.
“The shares trade on a 35% discount to the historic tangible net asset value (520p), a level which we believe more than discounts our concerns over the medium-term outlook for the UK housing market. We therefore reiterate our Buy recommendation,” Jackson concluded.
Panmure Gordon has reiterated its “buy” recommendation for Spirax-Sarco Engineering and bumped up its price target following the steam trap and pump specialist’s pre-close statement on Tuesday.
“Organic growth rates are running as expected but mix and margins are developing favourably at a faster pace. With the factory changes and with growth in Asia, the story has much further to run in our view,” Panmure analyst Oliver Wynne-James suggests.
The broker’s price target has been increased from 1720p to 1760p after it increased by 4% its earnings per share estimates for this year and next. Sales growth assumptions have been left broadly unchanged.
The key changes concern margins rather than growth rates, with the broker seeing improvements as a result of “mix (more maintenance and pumps), input costs, the overhead reduction, some FX [foreign exchange] and then the operational gearing.”“Going forward the drivers should be the factory footprint changes (up to 2% of sales gross enhancement), distributor consolidation, mix (pumps and Asia) and operational gearing, with some give back derived from FX and higher material costs,” Wynne-James added
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