Broker tips: Berkeley Group, Rolls Royce, Entertainment One

The homebuilder comitted to returning £16.34 per share for the period until 2021, versus £13 per share previously.

Coming on top of the £4.34 per share already handed back to investors that implied the group was on track to return £12 per share by 2021, equivalent to a run-rate of £2 per annum and equating to a 6% yield as of 4 December, analyst Harry Goad said in a research note sent to clients.

Current market conditions were described by the company as having "good underlying demand in a stable operating environment".

Goad left his 'neutral' recommendation in place and lifted his target price from 2,814p to 3,101p.

Bernstein downgraded Rolls-Royce to ‘underperform’ from ‘market perform’ and cut its price target to 515p from 602p.

The bank noted that since early last year, it has had a negative view on the fundamentals of Rolls-Royce's businesses, particularly the ability of the civil aerospace segment to improve margins and cash flow over the next few years.

However, the rating downgrade was driven by the change in CEO and its view that the balance of risks to the upside and downside were neutral until Warren East outlined his plans for the company after his first six months at the helm.

Bernstein said last week's strategy review update did not indicate a fundamental shift in the prospects of the company.

At the pre-finance level Entertainment One’s financials didn’t change much after the company’s latest set of interims, but the immediate revenue and costs had shrunk and its recent refinancing would significantly increase its debt costs, Peel Hunt said in a research note sent to clients.

Furthermore, there was no sign of a move to cash inflows in the foreseeable future, Peel Hunt said.

At 6.875% the coupon on its £285m senior notes with maturity in December 2022, together with continued funding from IPF and a £100m revolving credit facility entailed a “significantly” higher debt cost, the broker pointed out.

Analyst Malcolm Morgan added that: “The shares look inexpensive but the propensity for major swings in elements of the forecasts is high. This undermines the good track record of delivery at the net level.”