broker recommendations

BA-Merrill Lynch 02/07/2009 No Rating

The group's formation the 50:50 property joint venture with BoS is a positive, as it transfers the bulk of the company's European debt into an off-balance sheet JV, thus separating European funds management business from the European debt, which the broker thinks was close to breaching covenants.

It's all nice looking, but the broker thinks the stock would trade closer to fundamentals if the group were to make some asset sales and actually de-lever the balance sheet. That and improve disclosure and reinstate the dividend.

The No Rating is maintained.

Citi 03/07/2009 Upgrade to Hold, High Risk from Sell,
Speculative Risk Target $0.11 , ( 12.7% from target)

Citi has removed the valuation discount it had applied to setting its target price due to de-risking after the company's new JV with BoS. This sees the price target rise to 11c (from 5c).

The loss of UK and European asset income is somewhat offset by an increase in funds management income from managing the JV assets, but the broker's FY09-11 EPS still falls 0.8%, 28% and 16%. However, the broker says the JV "greatly enhances the future viability of Valad", so no surprise that the recommendation is upgraded to Hold from Sell.

JP Morgan 09/07/2009 Underweight Target $0.08 (- 20.0% from target)

Target $0.08 (was $0.06). Following the group's sale of its European business the broker sees some valuation support but this is offset by ongoing risks with respect to covenant pressures.

As a result the broker retains its Underweight rating despite a modest increase in price target.