BEST OF THE BROKERS

BABCOCK INTERNATIONAL
JP Morgan Cazenove rates the defence and security services group “overweight”. Its analysts are impressed by the size of the opportunity for the group’s support services division, as well as the potential to improve margins by changing the contract mix. Babcock trades on an enterprise value to Ebitda multiple of eight times, more than the sector average of 7.1, but JP Morgan says the premium is well-deserved and sees further upside.

ELECTROCOMPONENTS
UBS has cut its forecasts for full year 2012 earnings per share from 20.9p to 20.2p, and from 23.2p to 20.7p for 2013. However, it still thinks the firm will continue to grow in fiscal 2012-13. Analysts note the firm’s share price is correlated with Premier Farnell, although not entirely fairly. They point out that Electrocomponents’ second quarter sales were up on the fourth quarter, unlike Premier Farnell, but still think the stock will struggle to “break out”.

RUSHYDRO
Goldman Sachs has removed RusHydro, Russia’s largest hydroelectric power producer, from its Central Eastern Europe, Middle East & Africa Focus list because it sees no positive short-term catalysts for the stock. It still rates the stock a “buy” and its target price of $6.80 is unchanged. It believes that despite regulatory pressure on power tariffs, RusHydro will benefit from higher energy prices, which should increase by 15 per cent this year.