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Expert View: Standard Life Aberdeen, Saga & Auto Trader

Our daily roundup of analyst commentary on shares, also including WH Smith and Intertek.

by Michelle McGagh on Apr 13, 2018 at 05:00

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Key stats
Market capitalisation£11,203m
No. of shares out2,979m
No. of shares floating2,865m
No. of common shareholdersnot stated
No. of employees7768
Trading volume (10 day avg.)7m
Profit before tax£1,181m
Earnings per share29.62p
Cashflow per share36.91p
Cash per share343.28p

Standard Life Aberdeen is a value play, says Jefferies

A meeting with co-chief of Standard Life Aberdeen (SLA), Martin Gilbert, has reinforced Jefferies’ belief the stock is a ‘value play’.

Analyst Phil Dobbin retained his ‘buy’ recommendation and target price of 469p on the stock after a meeting with Gilbert to discuss the sale of its insurance arm to Phoenix, the integration of the Standard Life and Aberdeen fund businesses and the ‘long-term shape of SLA’.

He said should the Phoenix deal proceed, SLA would be left with £4.3 billion of cash, which could be distributed to shareholders.

‘We see SLA as a value play in the sector,’ he said, adding a buyback could provide a catalyst for the shares.

‘We think the simplest way to make the Phoenix deal earnings accretive is a share buyback of £1 billion to £2 billion,’ he said.

The shares jumped 3.2% to 377p yesterday.

Key stats
Market capitalisation£1,380m
No. of shares out1,120m
No. of shares floating1,111m
No. of common shareholdersnot stated
No. of employees5269
Trading volume (10 day avg.)3m
Profit before tax£240m
Earnings per share14.02p
Cashflow per share17.55p
Cash per share4.96p

Saga growth will stall but don’t worry, says Peel Hunt

Weak growth awaits broker Saga (SAGAG) but Peel Hunt says the shares were still undervalued and the business ‘attractive’.

Analyst Andreas van Embden retained his ‘buy’ recommendation and target price of 195p on the stock, after mixed full-year results that showed profit before tax increased 1% to £190 million but ‘with a disappointing mix’. The shares jumped 5.7% to 123.7p yesterday on the news.

‘Saga’s transition towards an affinity broker model came under pressure last year, with the broker losing competitive momentum due to Saga-specific issues,’ he said. ‘At a price/earnings of c.9x 2018/19 earnings per share, the shares are undervalued relative to a typical 16-18x broker multiple.

‘While we acknowledge weak growth ahead, fundamentally we believe Saga is an attractive business with strong cash generation potential once the transition is achieved.’

Key stats
Market capitalisation£3,208m
No. of shares out948m
No. of shares floating918m
No. of common shareholdersnot stated
No. of employees824
Trading volume (10 day avg.)4m
Profit before tax£212m
Earnings per share15.60p
Cashflow per share16.40p
Cash per share0.82p

Auto Trader is compelling company, says Numis

A capital markets days at car classifieds website Auto Trader (AUTOA) showed how the company is planning to lessen the impact of falling car sales and Numis believes the stock is still ‘compelling’.

Analyst Paul Richards retained his ‘buy’ recommendation and target price of 523p on the shares, which fell 4.9% to 339.2p yesterday.

‘By broadening its horizons, it is well placed to continue delivering robust revenue growth, improved margins, and strong cash generation,’ he said.

Richards said the group outlined a new suite of products, including a financing search.

‘We believe growth in product, price, and manufacturing and agency revenues will offset curtailed growth in stock, which will be impacted by used car transactions that are expected to fall 1-3% this year,’ said Richards.

‘The group’s shares have fallen 20% since June 2016 and now trade at under 20x March 2018 earnings.

‘While acknowledging that UK automotive remains out of favour, we view the valuation as compelling for a platform business with a pre-eminent market position.’

Key stats
Market capitalisation£2,223m
No. of shares out110m
No. of shares floating108m
No. of common shareholdersnot stated
No. of employees13773
Trading volume (10 day avg.)m
Profit before tax£184m
Earnings per share103.57p
Cashflow per share140.18p
Cash per share34.38p

Airports help WH Smith avoid turbulence

Newsagent WH Smith (SMWH) may be impacted by a shrinking high street but Hargreaves Lansdown believes its presence in airports will continue to compensate.

The company reported interim results showing profits down 1% to £91 million, fuelled by a decline on the high street where profits fell 6% to £50 million. The travel business continued to grow, with profits up 5% to £41 million. The shares rose 2% to £20.18 yesterday.

Analyst George Salmon said: ‘It would be easy for investors assume WH Smith would be caught in a similar predicament to other established UK retailers like Debenhams and Mothercare. The brand is synonymous with the UK high street, and it doesn’t have a sizeable online business to lean on.’

But he flagged the flat performance alongside a 10% increase to the dividend. ‘The key is the travel division, which continues to deliver robust growth,’ said Salmon.

‘The attractive feature of this side of the business is the customer is either in such a rush that convenience takes priority over price, or in the case of airports, there aren’t many alternatives.’

Key stats
Market capitalisation£7,754m
No. of shares out161m
No. of shares floating160m
No. of common shareholdersnot stated
No. of employees43906
Trading volume (10 day avg.)1m
Profit before tax£560m
Earnings per share168.65p
Cashflow per share247.42p
Cash per share84.89p

Shore Capital: Intertek deal could see revenue recovery

Quality and safety services provider Intertek (ITRK) has acquired Columbian inspection business Proasem, which could lead to a revenue recovery, says Shore Capital.

Analyst Ben McSkelly retained his ‘hold’ recommendation on the shares, which inched 5p higher to £48.10 yesterday.

‘The deal is expected to close in the next four weeks, no consideration details are given but the business did generate £4.5 million of revenues in 2017,’ he said.

‘We note that while Intertek remains cautious overall on guidance for its resources division, guidance for the current year includes a small revenue recovery in the second half.’

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Look up the shares

  • Auto Trader Group PLC (AUTOA.L)
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  • Intertek Group PLC (ITRK.L)
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  • Saga PLC (SAGAG.L)
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  • Standard Life Aberdeen PLC (SLA.L)
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  • WH Smith PLC (SMWH.L)
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