Broker tips: Shire, Afren, AO World, Broadcasters

NPS Pharmaceuticals, bought by Shire on Monday, is a “natural fit” for the UK pharma group and the $5.2bn price tag paid is “undemanding” if guidance is correct, according to UBS. The bank kept a ‘buy’ rating on Shire.

“With NPS product Gattex approved for the treatment of Short Bowel Syndrome, a gastrointestinal disease, and with Natpara for the treatment of hypoparathyroidism facing [approval this month], we believe the NPS acquisition makes strategic sense for Shire given its focus on gastro-intestinal disease and rare diseases,” UBS said.

The substantial reduction in reserve and resource estimates at Afren’s 60%-owned Barda Rash field is a “significant negative”, according to Canaccord Genuity which downgraded the oil and gas stock from ‘buy’ to ‘hold’ and lowered its target price from 65p to 27p.

Canaccord analysts Thomas Martin and Charlie Sharp said the development was “very disappointing”. “This news clearly affects the price that Afren may be able to achieve, and eliminates a potential source of funds to aid with refinancing,” they said.

‘Buy’ shares of AO World, recommended broker Numis Securities, after sales growth at the online electrical appliances retailer accelerated in the third quarter.

“We continue to believe that AO's superior customer proposition underpins a huge growth opportunity, both in the UK and Europe and retain our ‘buy’ recommendation.”

After a surprising decline in print advertising during 2014 and the inexorable increases of online video, broker Berenberg views the media sector as expensive, with the best potential for structural growth in online, gaming and outdoor.

As far as individual shares, Berenberg added ITV to a growing list of 'sell' recommendations that includes Sky, WPP, Mediaset España, and Atresmedia, while suggesting investors 'buy' defensive media companies with solid cash flow generation and certain picks within online, gaming and outdoor: Xing, Ubisoft, JCDecaux, Publicis, Mediaset, SES and EI Towers.