Broker tips: PZ Cussons, Vodafone, UK banks

(ShareCast News) - PZ Cussons has achieved a "solid" first half given the challenges, according to Investec.The consumer goods company reported a 0.2% dip in reported revenue to £385.9m in the first half due to foreign exchange headwinds. Pre-tax profit fell 3.7% on a reported basis to £42.1m.The maker of Imperial Leather soap said if currency effects were stripped out, revenues would have been 9.6% higher and profit up 2.1 %.The company said a strong performance in Europe was driven by the UK washing and bathing division with a continuous innovation pipeline and the launch of a new range of Carex bodywash products. The Europe beauty division was also boosted by a new in shower gradual tan lotion from St Tropez and a new range of Sanctuary products.However, Europe's success was offset by a difficult trading environment in Nigeria and the impact of weaker currencies in Asia and Africa."Given the challenges, PZ Cussons has produced a solid 1H result which shows that the diversification in recent years into Beauty and Food is helping to counter the volatility from emerging markets," said Investec analyst Nicola Mallard."The key risk to the immediate outlook remains a further devaluation of the naira which would generate further margin attrition in this region. We make no changes to forecasts today, but remain watchful of the situation."Investec kept its 'buy' rating on the stock but cut its target price to 312p from 327p. Jefferies has upgradedfrom 'hold' to 'buy', raising its target price from 230p to 250p on what it called a window of opportunity for the telco.The investment bank said the EU mobile sector is benefitting from supportive pricing and the macro economic backdrop."Easing macro pressure should translate into less price sensitivity," the note said."Mild price inflation is already evident with competition more focused on product capability (TV/fibre, raising 4G data allowances), less on cutting monthly fees."It also said the company's performance gap against its competitors is also narrowing, and highlighted that while other FTSE companies are finding dividends under pressure, Vodafone's "covered 5.4% March 17 yield should look attractive".However, Jefferies did highlight that the Liberty Global acquisition is still needed to secure the company's long-term prospects."Last summer we took the (then) anti-cons view that VOD is the more likely acquirer for reasons of regulation ('European champions' ambition), capital structure and complexity (VOD/LBTYA: Europe in Charge, More Likely, 29 May 2015)."VOD-LBTY valuations have narrowed substantially. The sort of take-out offer that LBTY might feasibly accept was value-destructive for VOD s/ holders last summer but could be materially value-accretive (to both sets of s/holders) now." UBS re-initiated coverage on the five large UK banks, backed by new models and analytical support.It upgraded Royal Bank of Scotland to 'buy' from 'neutral', cutting the target price to 350p from 363p.UBS argued that until now, the bank's small index weight - 0.6% of the FTSE 100 - and legacy issues have given investors sufficient excuse to avoid the shares.However, "the recent selloff has seen RBS fall too far, in our opinion, leaving it a lower risk and more attractive return prospect than the market appreciates."It said RBS is looking more attractive as the investment bank shrinks and costs are radically reduced, targeting a 55% cost/income ratio in 2018.UBS added that risks from ring-fencing and other regulatory changes are now considered much lower than at Barclays, for example.Lloyds Banking Group, which it rates at 'buy' with a slightly lower price target of 88p from 97p, remains the bank's key call."Though the UK rate view presents risks to 2017 income levels, we think LBG has more room to manage interest income than the market believes, via mix change, and deposit and wholesale funding re-pricing."UBS kept its 'buy' ratings on HSBC and Barclays, cutting the price targets to 520p from 540p and to 215p from 302p, respectively.Meanwhile, it maintained Standard Chartered at 'neutral', trimming the price target to 510p from 609pUBS pointed out that UK banks have started 2016 poorly and full year 2015 are likely to include sombre trading updates.In Lloyds and RBS, its preferred names, it sees attractive businesses, lower regulatory risk, and 46-58% of market cap returned by dividend or buyback by end-2020E."Given weak recent performances we remain Buyers of HSBC and Barclays too, though we see lower total returns and higher regulatory risk," the bank said.As far as StanChart is concerned, however, it said the de-leveraging and de-risking process is likely to pressure income as loan-losses rise.