BEST OF THE BROKERS

ASSOCIATED BRITISH FOODS
Morgan Stanley rates the retail group “equal-weight” with a target price of £11. The broker has trimmed its earnings estimates by 2.5 to three per cent over the next three years and cut its target price by 50p following the firm’s recent results. Morgan Stanley believes that UK like-for-like sales are now flat, with sustained double-digit growth in Europe, and expects margin contraction of around 1.2 percentage points this year.

INMARSAT
Citigroup has started covering the satellite communications firm with a “buy / medium risk” rating and a 12-month target price of 850p. The broker sees Inmarsat as a relatively low-risk play on a maritime and civil aerospace recovery, given its exposure to emerging markets. Citi adds that Inmarsat’s land mobile division is a play on global instability, which it thinks can lift first-half numbers thanks to unrest in the Middle East.

HMV
UBS rates the struggling retailer “neutral” and has cut its 12-month target price from 17p to 25p. The broker forecasts that HMV’s net debt will increase to more than £130m in the first half of 2011, making it likely to breach covenants. UBS thinks that the firm would be in a more stable financial position if it issued equity to pay down its debts, given the uncertainty around its declining sales.