| CATEGORY: BROKER RECOMMENDATIONS SECTOR: FIXED LINE TELECOMMUNICATIONS |
Broker tips: BT, Tesco, AstraZeneca |
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Fri 17 Apr 2009
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LONDON (SHARECAST) - Citigroup has issued a positive broker note on telecoms giant BT but has suggested that the company will need to cut its dividend.
‘The key issue for BT is cash generation and the choices surrounding uses of cash. Inevitable material pension top-ups, the existing capital investment plans and the current dividend commitment cannot be accommodated by the company's organic cash generation - a dividend cut at the full year looks certain in our opinion,’ the US bank’s investment analyst Mike Williams said.
Williams beleives ‘the fourth quarter should draw a line under the events of the past 18 months.’
Supermarket giant Tesco is due to declare full-year results next week and Merrill Lynch expects the figures to put paid to speculation that the UK market leader is losing its touch.
“Tesco's continued like for like deficit to its main competitors has sparked concern that 'the empire is crumbling'. That is only human but fears seem overdone,” claims Merrill Lynch analyst John Kershaw.
With overseas growth and upside potential in the personal finance market, where Tesco has announced plans to take on the banks, Merrill Lynch believes Tesco can continue to grow earnings at 10% or more per annum “into the medium term”.
“As investors gain comfort that Tesco remains a growth vehicle where returns are set to modestly build and net debt gently ebb, we think the shares should re-rate,” Kershaw concludes.
A US court has temporarily barred Canadian generic drug specialist Apotex from launching a generic version of drug giant AstraZeneca’s asthma treatment for children Pulmicort Respules, prompting Panmure Gordon to reiterate its recommendation to buy the shares.
‘This is a relatively minor victory but the removal of a near-term downgrade risk could be finalised after a hearing on 27 April, if the court affirms the granting of a preliminary injunction,’ the broker said.
Panmure Gordon has left its profit forecasts unchanged following the court’s decision and currently has a price target of 3100p set for AstraZeneca.
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