London broker comment corner; Goldman Sachs upgrades McBride, positive on SABMiller

Proactive Investors brings you the buzz from the brokers, with a wrap of overnight comment from some of the biggest names in the London square mile

From London, household goods provider McBride (LON:MCB) has been upgraded to 'buy' from 'neutral' by Goldman Sachs analysts.

They say the firm's current valuation is unjustified and presents a buying opportunity, given the City heavyweight's expectation of improving earnings and cash returns for the stock.

"However, we remain mindful of the longer-term outlook given McBride’s vulnerable position in a supply chain that is at risk from a structural squeeze on margins following Tesco’s recent announcements," said Goldman, which targets a price of 136 pence for McBride shares.

Investment bank Goldman also says SABMiller (LON:SAB), which makes Grolsch, Peroni and bought Foster's Group last year, is still the best positioned brewer and drinks firm on its consumer staples card and reinstates its 'buy' rating on the stock.

SABMiller will release a fourth quarter 2012 trading statement on April 19 this year, added Goldman, which expects the statement to demonstrate continued robust volume and revenue growth.

"We continue to view SABMiller as the most attractive strategic asset within the sector," said analyst Mitch Collett, which targets a price of 2750 pence for the firm's shares.

Also in a note today, Goldman said it viewed positively Kurdistan focused Genel Energy's (LON:GENL) asset base - a view reinforced by an analyst visit last week.

"We believe that, with capital markets tight, the company has the ability to undertake accretive deals with its large cash reserves. In the short term, we believe the political situation is likely to remain volatile but we see potential for commercial exports in the future," commented Christophor Jost.

Genel was formed from the union of Vallares with Turkey’s Genel to create the listed oil explorer.

Wall Street bank Citi has downgraded miner Xstrata (LON:XTA) to 'neutral' from 'buy' and reduced its target price to £12 from £13.50.

Analyst Heath R Jansen said the diversified mining firm was now trading at a 20 per cent price/earnings ratio against that of giant Rio Tinto (LON:RIO) and a 10 per cent  premium to BHP Billiton (LON:BLT), while the returns profile did not support this premium. Hence, the downgrade.

Citi said its own analysis of the mining companies suggested that Xstrata had underperformed its peers in recent years and while it believed this would change in future, 2012 was likely to be a 'challenging' year for the company.

Elsewhere, Investec released a note on budget airline easyJet (LON:EZJ) today, which unveiled first quarter results, and rates the stock a 'buy'.  The broker has also increased its target price to 500 pence compared to 456 pence previously.

Today, the firm said easyJet revenues rose 16.7 per cent in the quarter while traffic rose by 8. 1 per cent.

"easyJet Q1 revenues rose 16.7 per cent, comfortably ahead of consensus. Both unit revenues and unit costs are ahead of our forecasts," said analyst Andrew Fitchie in the note.

The broker said as a result, it saw a 9 per cent upgrade to full year consensus.

Chemring (LON:CHG), the ammunition and countermeasures group, was downgraded by Credit Suisse to 'neutral' from 'outperform' today and its target price was lowered to 420 pence from 460 pence.

The bank said the firm had once been the 'definition' of a growth stock, but its earnings performance and outlook statements over the last six months were evidence of a defence cycle that has turned the corner and the business was now in a new 'norm' where growth was much weaker.

Profits in the year to October only crept ahead to £90.8 million from £89.1 million, despite revenues jumping by 25 percent to £745 million, the firm revealed on Tuesday.

Turning to small caps, Singer Capital Markets, following a meeting with management of ZincOx (LON:ZOX), confirmed that the Korean recycling plant (KRP1) project is on track and upheld its ‘buy’ recommendation on the company.

Singer analyst Charlie Long said the plant is on time and budget for hot commissioning during this quarter, which is currently expected at the end of March.

Elsewhere, house broker Fairfax said today's statement from Turkey focused Ariana Resources (LON:AAU) showed the company was making good progress on the Red Rabbit project.

The firm said the feasibility for the Kiziltepe part of the project was nearly complete.

Gold production should rise to 21,400 ounces in 2015 and the mine is scheduled for an eight year life but exploration is likely to allow further expansion of the gold resource, production rates and mine life, said Fairfax, which rates Ariana a 'buy' with a target price of 10 pence.

Elsewhere, analyst Barney Gray at broker Old Park Lane Capital has called Range Resources (LON:RRL, ASX:RRS) and Leni Gas & Oil's (LON:LGO) Trinidad tie up, announced yesterday, "mutually beneficial".

The broker, which rates both stocks a 'buy', released notes on both companies following news they would jointly develop onshore oilfields on the island.

The deal will see Range taking a 50 per cent stake in the Goudron oilfield by spending US$8 million. LGO has an option to acquire a 15 per cent stake in the Beach Marcelle project by spending a maximum of US$7 million.

Gray described the deal for Range as "very astute" and for  LGO, the Old Park Lane Capital analyst said it was a "great".

Meanwhile, Metals Exploration (LON:MTL) called the last three months of 2011 a “rewarding” quarter, which saw the mining firm make significant progress at its flagship Runruno gold-molybdenum mine in the Philippines.

The company has now started earthworks at the Runruno site with the programme of early site works expected to take five months to expedite construction.

House broker Fairfax believes the company is significantly undervalued at 11p with more than three times upside at this point.

Mining analyst John Meyer said the team had made good progress at Runruno with permits acquired and earthworks started.

New results could add value before commissioning of a mine where much of the technical risk now seems to have been addressed, he added.