Broker tips: BSkyB, Burberry, Lloyds

In a statement of the blindingly obvious, Panmure Gordon says that the probability of a successful takeover by Rupert Murdoch's News Corporation of the satellite broadcaster BSkyB has been reduced to zero. Panmure, which previously thought there was a 10% chance of the deal going ahead, places its target price on BSkyB "under review", following yesterday's news that NewsCorp, which publishes the Sun and the Times, has withdrawn its bid for the satellite broadcaster. "As the market now has certainty on the outcome, we would expect the shares to rally, at least in the short term.," Panmure said, adding that it is now looking "into the fundamentals in more detail." Panmure has a "hold/special situations" recommendation on BSkyB.Credit Suisse has raised its target price on Burberry, but the broker thinks that a lot of investment will be needed to maintain strong sales growth and keeps its "neutral" recommendation on the luxury fashion chain. It ups its target price on Burberry to 1,420p from 1,310 following yesterday's trading update. The broker was very impressed with the strong sales Burberry posted and thinks that growth in China will help it maintain its momentum. However, a luxury brand such as Burberry has to plough in a lot of money to maintain its appeal. "A lot of reinvestment is required to support the current exceptional growth levels (above 30%): this means significantly higher opex (e.g. customer service, planning, warehousing, etc), higher depreciation, extra costs with flagship store projects, etc," Credit Suisse notes. "This is why margin guidance remains unchanged." Outlining its "investment thesis", Credit Suisse notes: "Burberry shares are underpinned by very strong top line momentum and perceived corporate activity appeal, but investment step-up should cap margins in the short term and its premium valuation to peers has actually widened to new all-time highs, keeping us Neutral on the stock." It notes that shares in Burberry trade at about 22 times 2012 estimated earnings, a 20% premium to the sector.The analysts at Goldman Sachs have upgraded their recommendation for part-nationalised lender Lloyds from 'neutral' to 'buy' due to a more attractive risk-return trad-eoff following the recent decline in stock price. Goldman's analysts also point out three possible bullish catalysts for the medium-term: the stress test results (to be released Friday) should reveal the entity's limited exposure to European sovereign debt and its solid capital ratio; progress in UK branch sales; and greater transparency over the regulator's future decision of possibly not requiring more divestments.