Brooks Macdonald, Capita, Tesco: Best of the Brokers for 6 October 2015

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I want to grow old with you, was Shore Capital’s message for Aim-listed wealth manager Brooks Macdonald. The broker maintained its “buy” rating and upgraded its fair price to 2,075p from 1,875p on the strength of its full-year results, citing a number of opportunities for the company to increase margins, and the fact that it is outperforming larger rivals. The dip in price following the directors’ share sale presents an attractive offer to buy now, the broker said.

 

Outsourcing company Capita’s possible £396m cash offer for insurance company processing provider XChanging has not affected S&P equity’s “buy” rating nor target price of 1,400p. According to Capita, the acquisition would immediately deliver returns significantly in excess of the capital costs but the broker said it is still too early to judge.

 

Cantor Fitzgerald said Tesco’s interim results tomorrow, “could be very disappointing” unless the revised strategy to rebuild UK and group profits is convincing. The broker predicts group operating profit of £330m (compared with a market consensus of over £400m) and would like to see the management discuss a longer-term recovery strategy to 2020, to maintain share price and avoid a rights issue. The broker is currently reviewing its “buy” rating and target price of 180p.