UK MARKET TALK ROUNDUP: BROKERS COMMENTS

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 0653 GMT [Dow Jones] Royal Bank of Scotland initiates coverage on Hikma Pharmaceuticals (HIK.LN), with a hold rating and 750p target price. "Our optimistic forecasts reflect Hikma's strong position in MENA [Middle East and North Africa] and its strategy of globalizing the platform, which should allow it to compete effectively in the US and Europe," it says. However, sees execution risk associated with the successful implementation of the global platform strategy, and with structuring value-accretive deals in an increasingly competitive M&A environment in the MENA region. "We believe the current valuation fairly reflects our (and consensus) sales and earnings growth estimates. We await more clarity on execution risks before re-considering our stance," it adds. Shares closed at 688p. (ishaq.siddiqi@dowjones.com) 0653 GMT [Dow Jones] Punch Taverns's (PUB.LN) trading update is in line with expectations, says KBC Peel Hunt. However, in view of the challenging trading outlook for FY '11, the brokerage downgrades its FY '11E pretax profit forecast by 7% to GBP123M. Says this assumes no LFL growth or margin improvement. Notes net debt has been reduced by GBP0.2B since the beginning of the year to GBP3.2B. Keeps the stock at hold and puts 90p price target under review. Shares closed Monday at 65p. (michele.maatouk@dowjones.com) 0652 GMT [Dow Jones] Goldman Sachs downgrades Majestic Wine (MJW.LN) to neutral from buy following the stock's recent outperformance. Notes that since being added to the buy list on April 22, the stock is up 9.2% vs the FTSE World Europe. Still, "we continue to view Majestic's superior sales performance, solid margins and strong returns as worthy of a multiple more in line with the EU Retail sector's historical EV/Ebitda median of 8.9x than with its own historical median of 7.7x." Keeps price target at 370p. Shares closed Monday at 308p. (michele.maatouk@dowjones.com) 0649 GMT [Dow Jones] Royal Bank of Scotland upgrades BP (BP.LN) to buy from hold, but cuts its price target at 455p from 595p. Says a decline in BP's value of $60B relative to closest peers since the Macondo oil spill blowout has created a favorable risk/reward balance. Expects the first relief well to intersect the Macondo bore by mid-July, which will be a turning point for BP's share price. "Stopping the flow of oil will cap the physical volume of the spill, reduce the daily costs being incurred, cool the political temperature and, if BP's share price remains excessively depressed, it could trigger credible merger speculation," adds RBS. Shares closed at 333p. (ishaq.siddiqi@dowjones.com) 0634 GMT [Dow Jones] Tullow Oil (TLW.LN) appears to be on track to close its Uganda asset deal with Heritage Oil (HOIL.LN), Total (TOT) and Cnooc (CEO), says Panmure Gordon analyst Peter Hitchens. "It appears Tullow has everything all sorted out apart from getting it all signed," he said, adding that full closure of the deal may take a few more weeks. Tullow will probably have little news to drive shares over the summer, but in September will drill new wells that are potentially very exciting, he adds. Gives 1500p target, buy rating. Shares closed down 0.5% Monday at 1041p. (james.herron@dowjones.com) 0628 GMT [Dow Jones] PartyGaming's (PRTY.LN) trading update for the second quarter is better than expected, Numis Securities analyst Wyn Ellis says. Adds the group's statement that it is committed to play an active role in sector consolidation will go down well with investors. Has a buy rating and 400p target price. Shares closed Monday at 221p. (simon.zekaria@dowjones.com) 0627 GMT [Dow Jones] UBS upgrades Debenhams (DEB.LN) to buy from neutral, but nudges down its price target to 75p from 77p. Says the company looks cheap on all metrics following a 20% underperformance of the UK retail sector in the last three months. Expects the management to increase focus on delivering market share gains and positive like-for-like sales growth. "The upcoming refinancing and expected reinstatement of a dividend in FY '11 should convince investors of the longer-term investment case." Shares closed Monday at 57p. (michele.maatouk@dowjones.com) 0626 GMT [Dow Jones] Persimmon (PSN.LN) reports very positive numbers ahead of the first half so shares are likely to rise after the statement, says Liberum Capital analyst. Says the company already sold GBP1.5 billion worth of homes for the year, which is really good news and that margins are also ahead of expectations. Adds that borrowings are also lower than expected. Has hold rating. Shares closed Monday at 348p. (anita.likus@dowjones.com) 0625 GMT [Dow Jones] UBS upgrades GKN (GKN.LN) to buy from neutral. Says the recent decline in its share price offers a good opportunity to buy the stock again. "Although our investment case and profit forecasts are unchanged, we believe the lower valuation now offers an attractive risk-reward profile for investors," it says. Says GKN is a well-run business with leading technologies, strong market positions and several opportunities. "In addition, we see some further upside risk to profits. Our only major concern remains a low cash conversion, largely as a result of pension payments," adds UBS. Maintains 140p target price. Shares closed at 112p. (ishaq.siddiqi@dowjones.com) 0623 GMT [Dow Jones] Investec Securities upgrades AB Foods (ABF.LN) to buy from hold and raises target to 1080p from 1060p as it takes a more positive view of Primark's valuation ahead of the company's 3Q results on July 8. Increasingly sees Primark as a winning proposition and thinks profit growth at a rate of 12% to 14% per annum is sustainable on a five-year view. Says this merits a premium rating. Thinks the market's valuation on Primark of 7-8x Ebitda/15-16x PER is too low, and reckons 8-9x ebitda is more appropriate. Shares closed Monday at 947p. (michele.maatouk@dowjones.com) Contact us in London. +44-20-7842-9288 Markettalk.eu@dowjones.com (END) Dow Jones Newswires July 06, 2010 02:53 ET (06:53 GMT)