Alliance & Leicester "sell," target price reduced

07/08/08 - Panmure Gordon & Co

LONDON, July 8 (newratings.com) - Analyst Sandy Chen of Panmure Gordon maintains his "sell" rating on Alliance & Leicester Plc (AL.-GBX), while reducing his estimates for the company. The target price has been reduced from 450p to 180p.

In a research note published this morning, the analyst mentions that the company is likely to report additional write-downs on structured credits going forward. These additional write-downs, along with the normal impairment charge for customer loans, might easily offset the nearly £500 million of Alliance & Leicester’s underlying pre-impairment operating profit, the analyst adds. The company’s ROIC is likely to decline from 11% in 2007 to -1.4% in 2008 and -1.6% in 2009, Panmure Gordon says. The EPS estimates for 2008 and 2009 have been reduced from 4p to -22.89p and from 50p to -23.46p, respectively.