Evolution Securities this morning maintained a “buy” recommendation at Gem Diamonds Ltd (LON:GEMD), which it described as a “low risk diamond exposure” but lowered its price target from 301p to 267p ahead of the company’s forthcoming IMS and interims. The main sticking point is whether Gem offers much near term growth without the long-awaited expansion at its flagship Letseng project in Lesotho. The broker said it was also cautious that constrained mining flexibility had impacted the recovery of specials at Letseng, reducing near-term revenues and income. Elsewhere, Evo maintained an “add” rating for oilfield services group Petrofac (LON:PFC) on reports of a successful start to 2010 and strong growth in line with expectations –although a decline in backlogs raised eyebrows. Nevertheless, Petrofac is confident that backlogs will end up higher by the end of the year than they were at the end of 2009, which should drive further growth in 2011/12. Finally, Evo cut its recommendation on Northern Foods (LON:NFDS) to “reduce” from “neutral”, citing fears that profitability could come under increasing pressure from input cost inflation in FY11. Northern’s limited ability to offset cost rises through higher pricing combined with the prospect of cash pension contributions post the 2011 triennial pension review “could make the dividend unsustainable”.

Astaire Securities pointed to an improved first-half performance at dental lab services group 1st Dental Laboratories (LON:FDT), which posted a small pre-tax profit of £10k against a £0.326m loss last year, helped by tight cost control. Both the broker and the company agree that building revenue is the main challenge, which could be a problem given tough competition in a very fragmented industry. However, Astaire noted that progress had been made and there remained scope for continued consolidation in the industry. Moving on, Astaire said this morning’s strong trading figures from online retailer ASOS (LON:ASC) were unlikely to trigger a material change in numbers until there is greater clarity on the full year outcome. ASOS saw Q1 revenues increase by 48% to £65.8m, with retail sales up 52%. The international business now accounts for 37% of sales and grew by 111% in Q1 to £22.9m.

WH Ireland reiterated its “underperform” stance for Mitie Group (LON:MTO), despite reassurances that trading for FY10 is on-track, 78% of 2010/11 budgeted revenues secured with some…

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