Brokers' view: Collins Stewart

At Collins Stewart, healthcare expert Dr Julie Simmonds is a fan of care provider Caretech. Noting that the share price had sunk of late from 370p to 116p, Simmonds conceded that, while there were ‘legitimate reasons for this fall from grace, including concerns over local authority fee pressure’, ‘debt levels’ and ‘sector sentiment’, they are all ‘built into the price’.

Insisting that concerns over the fee rates are overdone, Simmonds argues that the existing debt covenants are manageable. Simmonds is forecasting EPS of 21.8p and 27.6p for 2011 and 2012 respectively on sales of £106.8 million and £111.7 million. Rating the shares as a buy, she identifies a target price of 185p.

Enthusiasm for Mecom
There was also enthusiasm for media group Mecom, which recently announced the sale of Presspublica, the company that owns a 51 per cent stake in Poland’s national newspaper, for €20 million. Mecom currently runs newspaper operations in Holland, Norway and Denmark, and analyst Simon Davies argues that the sale should strengthen its balance sheet, bringing the group debt down to €250 million, and leaving a smaller Polish regional newspaper business generating €5 million in EBITDA.

Identifying a target price of 370p, 70 per cent ahead of its current price, Davies argues that there is a ‘mismatch between European newspaper valuations’ and Mecom’s own 2011 3.5x EV/EBIDTA multiple. He rates the shares as a buy.