Broker tips: Vodafone, Aviva, Northgate

Following reports the Vodafone (VOD) is exploring a possible combination with Liberty Global, UBS has said the UK telecoms group may have to wait until its shares rise before undertaking such a sizeable deal.

"Near-term, we think the focus for VOD is on driving organic growth, integrating recent acquisitions and executing on Project Spring [investment programme]. Until the VOD share price is notably higher, it may be difficult for VOD to undertake a transformational deal," UBS analysts Polo Tang and Michael Hill said.

Shore Capital has raised questions with Aviva's £5.6bn takeover of Friends Life, after the companies announced the details of the all-share bid on Tuesday.

The broker said that the deal is a "rights issue in disguise" for Aviva, as it reiterated its 'sell' rating on the insurer. It said: "We remain puzzled why Aviva felt the need to do it now. Is it a camouflage for issues within its own internal restructuring and turnaround story?"

Peel Hunt has repeated its 'buy' call for Northgate after the vehicle hire group's interim results impressed the market on Tuesday, with the broker lifting its estimates for the full year.

"We consider this is an attractive entry position, given the trading outlook provides greater comfort over the returns profile, and we see scope for modest EPS upgrades as the organic investment initiatives bear fruit."