Broker tips: Hays, Go-Ahead, H&T

Recruitment firm Hays delivered full year results that were ahead of expectations but the outlook for the UK continues to look bleak in KBC Peel Hunt's view, though the broker notes this is largely reflected in the price."Current performance echoes what the peer group has been saying, with markets having been tough in the first half now returning to growth. International headcount is up c200 heads, but we note that there were reductions in UK and Europe - overall heads are down slightly to 4,508 from 4,558," said KBC analyst Henry Carver.The broker is sticking with its "hold" recommendation and 90p price target. It sees few catalysts for share performance in the near term, but the shares are worth holding for the 6.2% yield.Panmure Gordon is of similar mind to KBC. It also recommends holding the shares, though its price target is 92p. The broker thinks there are better opportunities elsewhere in the sector, such as SThree. Investors looking to invest in pawnbrokers, currently enjoying a rise in popularity on the back of the strength of gold, will find better value with H&T Group shares than those of its competitor Albemarle & Bond, research firm Equity Development believes."The [H&T] pledge book continues its steady growth, more from the gradual maturing of existing stores than from the initial impact of new store openings (it appears likely that gross profit from the core pawnbroking business will be 40%+ higher when the new stores opened since 2004 reach maturity) and so the PSC [pawn service charge] should continue to rise in line with that," Equity Development believes. The firm is expecting profits from purchasing gold will be lower in the second half of the year but the market is a volatile one and remains difficult to predict. "Profits for the year will be sensitive to the unpredictable level of gold purchasing as well as to the value of retail sales in the pre-Christmas period so we should prefer to quote a range of £23m to £26m: our central estimate is £24.6m on a Headline Earnings basis (£23.2m reported under IFRS), leading to earnings per share of 50.0p and dividends (including the special) of 9p."The earnings forecast puts the shares on a price/earnings ratio of just 4.8, which Equity Development notes is a 38% discount to the rating of its main rival, Albemarle & Bond and a 59% discount to the All-Share index.Even with an expected drop-off in profits from gold purchases, the research firm believes a discount of more than 34% is unreasonable.Panmure Gordon has cut its rating for bus and train group Go-Ahead Group despite Thursday's results from the group exceeding its expectations, as the broker has concerns over the potential lack of earnings growth in the coming years.The broker no longer thinks the shares are a "buy", but with a dividend yield of 7.4% - which Panmure Gordon thinks is sustainable - they are certainly worth holding. Earnings growth may be hard to come by, though, Panmure analyst Gert Zonneveld thinks."Margins in London are unlikely to recover to previous highs, particularly if new contracts continue to have more challenging quality incentive targets and lower revenue per mile. Furthermore, the fuel duty rebate may come down as the government looks to cut expenditure, which would drive up fares and most likely result in some volume reductions, which could have a negative impact on profits," Zonneveld speculates."Rail profitability may also struggle to improve, with London Midland possible heading for future losses and Southern requiring punchy revenue growth to maintain profit levels," Zonneveld adds.The broker's price target has been slashed from 1600p to 1200p.Elsewhere in the broking community, KBC Peel Hunt admits growth prospects for Go-Ahead's regulated passenger operations look uncertain, but thinks consolidation in the reregulated bus market will provide scope for future growth."With hardening London incentive targets and rail continuing to be affected by High Speed, it is the growth in deregulated services' passenger revenue, which we forecast at +4% this year, which should support profit," opines analyst Paul Hickman.With undrawn bank facilities of £177m, KBC thinks this firepower will be used on acquisition prospects in the deregulated market, where independent and municipal bus businesses are feeling the financial pressure.KBC is sticking with its "buy" recommendation and price target of 1300p.