Broker tips: ITV, real estate, Antofagasta
ITV's difficulties over the past year may not be over yet, JP Morgan said as it cut the TV station operator's share price to 74p from 96p.
In a note with the title 'It's worth waiting a little bit more' the broker noted that ITV, on which it keeps its 'neutral' rating, has seen its share price fall 20% so far in 2008 and 44% over the past 12 months.
Among the reasons it cited for its caution on ITV was the uncertain and deteriorating economic and advertising UK outlook, with the retail sector's advertising expenditure at risk in the second half of 2008.
It also noted that ITV is trading at a price/earnings ratio premium of 33% for 2008 and 27% for 2009 to its peers.
However, it added that it saw two conditions for changing its recommendation to 'buy'; the UK economy stabilises and ITV's earnings outlook improves or ITV's share price falls, bring its price earnings ratio into line with peers.
Morgan Stanley has downgraded British Land by two notches to 'underweight' from 'overweight' in a review of the European property sector.
The broker also cut its price target on the real estate giant to 560p from 1,280.
It downgrades fellow real estate company Land Securities to 'underweight' from 'equal-weight' and cuts its price target to 1,030p from 1,730p.
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Morgan now prefers European property stocks such as France's Gecina, which it double upgrades to 'overweight' from 'underweight'.
Explaining its pessimism on UK real estate stocks, Morgan said: "We are now close to the point at which banks in the UK will pull the plug on highly leveraged companies that are in breach of banking covenants."
A review of copper prices has prompted JP Morgan to cut its price target on Antofagasta to 760p from 787p and keep its 'underweight' rating on the South America-focused miner.
"In spite of having raised our copper price forecasts, in recognition of recent strength, we still believe that copper is more likely to embark on a medium term downtrend in the second half of 2008 than on an uptrend," JPM said.
The broker said it puts a 10% probability on copper hitting $12,000 a tonne over the next two years and a 60% probability on it reaching $5,000 a tonne.
It noted that Antofagasta is currently trading at higher price/earnings ratio to the average among the UK diversified miners it covers.
"Those odds do not stack up well for a producer like Antofagasta," JPM said.
"In the past nine months the group's share price has traded actively in a band between 600p and 800p and it now finds itself once more at the top of that band. From a trading perspective, therefore, we would see prices above 800p as particularly attractive selling territory in the light on our ongoing underweight recommendation on the group."
