Brokers' views: Collins Stewart

Collins analyst Michael O’Brien rates Severfield-Rowen as a hold. Reporting on the 2010 results of the structural steel producer, in which it reported sales that fell 24.4 per cent against 2009 to £264 million, he remarks that 2011 will be ‘a nadir both activity-wise and margin-wise’, adding that the ‘scale of the recovery will not be as strong as we originally anticipated.

He adds that Collins has recently ‘flagged our concern about the group’s dividend’, which was cut in 2010 from 10p to 7.5p, concluding that while the ‘fundamental recommendation is hold’ on the back of ‘the long-term prospects for the group’, in the short term ‘we believe the shares to be a straightforward trading sell’ with O’Brien arguing there is ‘dividend uncertainty, negative earnings momentum and a deteriorating balance sheet’

Gaining Pace
Meanwhile Jonathan Imlah is a fan of set-top box manufacturer Pace. Following Pace’s results, he quips that Collins is ‘at a loss to explain the 20 per cent drop in Pace’s share price’ following the announcement of the figures, though he concedes that it was ‘undeniably disappointing to hear that organic revenues would be flat in 2011’.

Forecasting a rise in sales to £1.55 billion in 2011 (2010: £1.33 billion), he adds that Collins is forecasting earnings growth of ‘close to 14 per cent over the next three years’. Identifying a target price of 296p, he rates the shares as a buy.