Broker comments in the UK today. Compiled by Dow Jones Newswires Markets Desk, markets.eu@dowjones.com Contact us in London. +44-20-7842-9464 Markettalk.eu@dowjones.com 1311 GMT [Dow Jones] The rise in value-added-tax to 20% from 17.5% from Jan. 4 next year will squeeze discretionary income in '11 and will make it harder for retailers to maintain performance levels, Shore Capital analyst Clive Black says. However, Black adds the impact will be partially offset by a lower corporation tax rate. Says food retailers will materially outperform in general retail spaces due to guaranteed footfall. Says the VAT rise is no shock, causing a spike in costs for retailers at the year end, and the continued exemption on food and children's clothes will be welcomed. Says passing on charges to consumers is unavoidable. DSG +4.8% at 29p, M&S +3.2% at 354p, Next +2.8% at 2201p, Tesco +1.9% at 396p. Sainsbury +0.5% at 331p. (simon.zekaria@dowjones.com) 1302 GMT [Dow Jones] U.K. Chancellor George Osborne's emergency budget will leave the country's energy industry reeling from a lack of investment, energy consultancy Inenco says. "Reducing corporation tax and the subsequent lowering of capital allowances will have a negative impact on organisations with high capital expenditure, most notably utility companies," says analyst Rebecca Seabury. Sees long-term impact on investment in new power stations and renewable technologies in the U.K. Adds public spending cuts are likely to force local government to scale back low carbon schemes and green projects. (jeffrey.sparshott@dowjones.com) 1248 GMT [Dow Jones] The rise in value-added-tax to 20% from 17.5% from Jan. 4 next year was expected and will burden retailers, Pricewaterhouse Coopers analyst Mike Bailey says. Says the rise to 20% was well-forecasted before the announcement Tuesday. Says retailers will face a burden although the notice period will soften the blow. Says the question for retailers is whether to pass on the extra charges to consumers. Says the rise will affect high-street retailers like Marks & Spencer (MKS.LN) and Next (NXT.LN) as well as non-food supermarkets like Tesco (TSCO.LN) and J Sainsbury (SBRY.LN). Still, shares in the major retailers are higher given there will be no VAT on food or children's clothes. M&S +1.6% at 348p, Next +1.4% at 2173p, Tesco +1% at 391p, Sainsbury +0.2% at 330p. (simon.zekaria@dowjones.com) 0902 GMT [Dow Jones] Investec nudges up Halma (HLMA.LN) price target to 315p from 305p, after the half-year results beat the brokerage's expectations. The group's defensive earnings and rock-solid dividend are enhanced by stronger medium-term growth prospects than at any time previously, says Investec. The full-year dividend of 8.5p is a record, a 7% increase year-on-year and the 31st consecutive increase of 5% or more. Investec says the market has been slow to credit management with the progress made and that the stock remains undervalued. Buy rating. Shares -0.2% at 271p. (andrea.tryphonides@dowjones.com) 0829 GMT [Dow Jones] Arbuthnot keeps a buy rating on Halma (HLMA.LN), says fiscal 2010 revenue of GBP459.1M beat its estimate by GBP4M. Says the weak market conditions seen in industrial safety in the first half are past history. Expects to raise its estimates for the fiscal 2011 by a significant amount. Shares -0.2% at 270.5p. (rachael.gormley@dowjones.com) 0823 GMT [Dow Jones] Numis increases Halma (HLMA.LN) fiscal 2011 pretax profit by 6% to GBP98.3 million and fiscal 2012 pretax profit also by 6% to GBP104.3 million. Says Halma's business model is exposed to less cyclical markets and geared to non-discretionary spend. Also sees plenty of headroom to fund acquisitions after strong cash generation in the fiscal 2010. Keeps add rating and 300p target price. Shares -0.3% at 270p. (rachael.gormley@dowjones.com) 0805 GMT [Dow Jones] Whitbread's (WTB.LN) 1Q update is very strong, with group like-for-like sales up 7.6% for the 13 weeks to June 3. It notes that encouragingly, Premier Inn LFL revenue per available room has increased 9.1% over the period, adding that this is the first positive quarter for 18 months. "We believe the risk to consensus forecasts clearly lies on the upside given the exceptional 1Q." It adds the stock continues to trade at a discount to its hotel peers. Reiterates buy recommendation and 1935p target. Shares +3.5% at 1530p.(michele.maatouk@dowjones.com) 0744 GMT [Dow Jones] Panmure Gordon raises Bunzl (BNZL.LN) price target to 769p from 738p following the company's solid trading update. The update confirms further progress in the company's dominant US operations as it wins further growth from existing customers, sys Panmure. It also notes the favorable impact of cost initiatives on UK & Irish operations taken after a tough '09. It notes the company's strong balance sheet and says it expects Bunzl to take advantage of acquisition opportunities. Keeps the stock at hold. Shares -099% at 740p. (michele.maatouk@dowjones.com) 0702 GMT [Dow Jones] Whitbread (WTB.LN) is firing on all cylinders, says Merrill Lynch, after 1Q sales beat forecasts. "We expect today's announcement to lead to further upgrades of consensus earnings forecasts," it says. "We reiterate our buy rating and 1600p price objective following today's very positive 1Q trading update." Shares closed Monday at 1478p. (michael.carolan@dowjones.com) Contact us in London. +44-20-7842-9464 Markettalk.eu@dowjones.com 0659 GMT [Dow Jones] Great Portland Estates' (GPOR.LN) acquisition of 35 Portman Square is another useful deal, says Execution Noble. The deal will produce a net initial yield of 7.7% and a capital value per sq ft of GBP726, which is good value for core West End investment product. "In a tight investment market where dry assets are now arguably overpriced, it is reassuring to see Great Portland finding ways to deploy its capital in high-yielding investments." Execution adds that exposure to West End and City investment and rental markets positions the company defensively against the backdrop of choppier economic conditions. Buy rating. Shares closed Monday at 296p. (michele.maatouk@dowjones.com) 0657 GMT [Dow Jones] Whitbread's (WTB.LN) first-quarter performance is strong, says Credit Suisse. Premier Inn's sales growth of 10.5% beats expectations of a 7% rise, CS says. "Greater visibility on margins will likely only come at the 1H stage but we expect consensus numbers to increase today," CS says. Outperform rating, 1812p target. Shares closed Monday at 1478p. (michael.carolan@dowjones.com) 0654 GMT [Dow Jones] Gilts have been outperforming bunds ahead of Tuesday's emergency budget as the market pins hopes on a reduced gilt remit and Chancellor Osborne taking more steps to pare the deficit in coming years. The recent rally has also been supported by the debt woes in the euro zone which have supported a flight to quality, but Barclays Capital sounds a note of caution. "If anything, there may well be scope to disappoint so we may see an opportunity for greater profit-taking, rather than setting of fresh longs, despite the recent groundswell of bullish sentiment," Barclays says. (neelabh.chaturvedi@dowjones.com) 0646 GMT [Dow Jones] Moody's Investors Service analyst says Japan fiscal consolidation plan released earlier in day has "positive nuance" though more work needs to be done to tackle Japan's worsening fiscal conditions; adds while fiscal plan doesn't give more upward pressure on Japan's Aa2 rating, it forestalls downward pressure. Moody's comments will likely ease JGB investors' worries over rating downgrade, which have grown after some major ratings agencies, including Moody's, S&P, Fitch, have recently increased alarm over Japan's ballooning debt. After release of government's fiscal plan, which promises to cap new JGB issuance for next FY below this FY's Y44.3 trillion, lead September JGB futures hit 2-week high of 140.84. (megumi.fujikawa@dowjones.com) 0639 GMT [Dow Jones] Bunds are higher Tuesday as China's forex move-fuelled risk rally fizzles out. Asian shares are trading lower and European equities are expected to follow suit. Attention will shift back to the troubles in the euro zone and its impact on the banking system, with Fitch Ratings Monday cutting its long term debt rating on BNP Paribas's debt by one notch to AA-. The Ifo business climate index in Germany at 0800 GMT is the only economic release of note in the euro zone, while in the primary market, The Netherlands sells bonds of up to EUR2B and Spain offers T-bills for up to EUR4B. September bunds up 0.11 at 127.51 and the 10-year bund is at 102.20 to yield 2.745% (neelabh.chaturvedi@dowjones.com) 0636 GMT [Dow Jones] USD/TWD still lower at 31.825 vs 31.999 yesterday on foreign fund inflows, but off midday's 31.800 after USD/CNY extends gains in afternoon, also on Taiex's 0.3% loss, says foreign bank trader. Tips pair in 31.800-32.000 band in afternoon. "The pair is likely biased down in short term on the better economic outlook amid improving cross-Strait ties," she says. Taiwan, China will begin preparatory talks on planned wide-ranging trade agreement Thursday in Taipei to hammer out final details of the pact, island's semiofficial Straits Exchange Foundation said Tuesday. (mason.wu@dowjones.com) 0630 GMT [Dow Jones] USD/HKD drifts higher, at 7.7773 vs 7.7721 late yesterday; trader from U.K. bank says various banks selling HKD to lock in profit, as euphoria over potentially stronger CNY has waned, though sales weren't heavy. "The key thing to look at will be the yuan. Agricultural Bank's upcoming IPO will also drive the demand for the Hong Kong dollar in the weeks ahead." Tips pair to stay in 7.7700-7.7850 range. (aries.poon@dowjones.com) (MORE TO FOLLOW) Dow Jones Newswires June 22, 2010 09:11 ET (13:11 GMT)
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