Broker tips: G4S, Unilever, Anglo American

Security services provider G4S is a better defensive cyclical growth play than catering giant Compass and comes on a cheaper valuation, claims Panmure Gordon.

The broker believes the firm operates in end markets with better structural growth prospects, so should see organic growth trough out at 3-5%.

Compass rallied last week following a better than expected trading update, which, along with the consequent re-rating, could act as a catalyst for an improved performance at G4S, says Panmure.

'Given its FX exposures (US$ and Euro account for c66% of earnings), we see no immediate downside risk to earnings,' it wrote in a note to clients Monday, repeating 'buy' advice and 293p target price.

The company also yields 3% and offers a strong balance sheet that should help it continue to make value enhancing acquisitions through the year, the broker adds.

'With 16% potential upside to our target price, we believe the shares look good value and remain positive ahead of its final results expected on 16 March.'

Unilever, the household goods giant responsible for Pot Noodle and Lynx aftershave, could struggle to deliver margin progression in 2010, worries Nomura.

The Japanese broker says the competitive and consumer environment is getting no easier, input cost pressures are returning and there's a need to further increase advertising and promotional (A&P) support to sustain volume growth.

Cost savings and input cost benefits for the fourth quarter were 830 basis points (bps), but Nomura thinks this falls to 115 bps by the end of 2010.

It keeps its 'reduce' stance on the Anglo-Dutch group.

Ambrian Capital was unsurprised that Anglo American's subsidiary Anglo Platinum announced a rights issue today, so keeps its 'hold' rating on the miner.

Anglo American will subscribe in full to its entitlement to the cash call, costing it $1.3bn, a decision described by the broker as effectively a swap of debt for equity.

More broadly, Ambrian says it favours Anglo's fellow miners Rio Tinto and BHP Billiton due to their greater exposure to iron ore. It thinks Anglo American's exposure to platinum is overvalued.

Ambrian has a 2,900p target price on Anglo shares.