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The Expert View: ABF, Ferguson and Britvic

Our daily roundup of analyst commentary on shares, also including Wincanton and Ashmore.

by Michelle McGagh on Apr 18, 2018 at 05:00

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Key stats
Market capitalisation£21,233m
No. of shares out792m
No. of shares floating347m
No. of common shareholdersnot stated
No. of employees132590
Trading volume (10 day avg.)1m
Turnover£15,357m
Profit before tax£1,843m
Earnings per share151.65p
Cashflow per share225.57p
Cash per share195.79p

ABF insulated from cold weather, says Hargreaves

Hargreaves Lansdown has hailed Associated British Foods’ (ABF) navigation of a brace of headwinds, as the unpredictable weather played havoc with its clothing chain Primark.

Results for the 24 weeks to 3 March showed revenues at the group up 3% to £7.4 billion and operating profit 1% ahead at £648 million. The shares were up 4.1% at £26.90 on the news.

Analyst George Salmon said that as Primark was ‘decking the shelves with coats and winter clothes, we got an unusually warm October’ and then it suffered as the Beast from the East hit spring and summer sales.

‘However, that bout of unseasonably cold weather is now behind us, and in any case investors know being open to the elements is just part and parcel of the retail game,’ he said.

‘What’s impressive in these results is management’s assertion that profitability in the all-important retail division will rise in the second half. Part of this is due to the benefit of a weaker dollar, but Primark has managed its stock well and improved its buying positions too.’

Barclays: Ferguson grabbing market share

Plumbing supplies firm Ferguson (FERG), previously known as Wolseley, has outperformed in the US and Barclays believes it can continue to grab market share.

Analyst Paul Checketts retained his ‘overweight’ recommendation and target price of £62.00 on the shares, which rose £1 to £53.76 yesterday.

Checketts said the company had ‘consistently outperformed its underlying markets and rivals in the US’.

‘We believe the company can continue to increase its market share without any material change in strategy,’ he said.

‘We remain of the view that Ferguson’s service proposition gives it a high degree of protection versus online-only operators. Ferguson is our top pick in the sector due to its strong market position, good management, high growth, and attractive valuation.’

Key stats
Market capitalisation£1,863m
No. of shares out264m
No. of shares floating259m
No. of common shareholdersnot stated
No. of employees4848
Trading volume (10 day avg.)1m
Turnover£1,541m
Profit before tax£248m
Earnings per share42.23p
Cashflow per share64.66p
Cash per share31.27p

Jefferies backs Britvic for medium-term growth

Drinks maker Britvic (BVIC) can continue to underpin profits in the medium term but Jefferies said near-term expansion looks unlikely.

Analyst Edward Mundy retained his ‘hold’ recommendation and trimmed his target price from 780p to 750p ahead of half-year results. The shares were up 5p at 703.5p yesterday.

Mundy is expecting ‘a robust first half’ with 4% earnings growth.

‘Our store checks would indicate that the industry response to the sugar levy is not a bad outcome for Britvic,’ he said. ‘However, with 2018 a year of transition and potential uncertainty from a deposit return scheme (for plastic bottles), we question whether significant further multiple expansion is likely in the near-term. Medium-term, we see a favourable outlook with profits underpinned by cost savings.’

Key stats
Market capitalisation£312m
No. of shares out125m
No. of shares floating114m
No. of common shareholdersnot stated
No. of employees17500
Trading volume (10 day avg.)m
Turnover£1,118m
Profit before tax£64m
Earnings per share33.05p
Cashflow per share44.06p
Cash per share26.67p

Activist call for Wincanton break-up is excessive, says Liberum

An activist investor in logistics specialist Wincanton (WIN) is calling for a break-up of the company, which Liberum has said is ‘excessive’ despite the company being undervalued.

Analyst Gerald Khoo retained his ‘buy’ recommendation and target price of 375p on the stock after activist investor Gatemore was reported to have taken a 2% stake in Wincanton and was calling for the group to be broken up through the sale of one of its two divisions.

‘Although we agree that Wincanton is significantly undervalued, we struggle to see the attraction of breaking up the group in this manner,’ he said.

‘The complexity might arguably make selling the whole group easier. Our recommendation remains “buy” with a… target price of 375p but our mergers and acquisitions valuation read-across implies much greater upside potential.’

The shares were trading at 248p yesterday.

Key stats
Market capitalisation£2,927m
No. of shares out707m
No. of shares floating399m
No. of common shareholdersnot stated
No. of employees252
Trading volume (10 day avg.)1m
Turnover£257m
Profit before tax£157m
Earnings per share23.71p
Cashflow per share24.76p
Cash per share100.51p

More to come from Ashmore, says Peel Hunt

Inflows at specialist emerging markets investment company Ashmore (ASHM) justify strong share price performance and longer term opportunities remain, says Peel Hunt.

Analyst Stuart Duncan retained his ‘add’ recommendation and target price of 440p on the stock after third quarter inflows were ‘significantly better than expected’, increasing assets 10% over the period. The shares jumped 3.8% to 411.2p yesterday.

‘Although short-term valuation metrics are not out of line with the rest of the sector, we believe the momentum in flows justifies the strong share price performance,’ he said.

‘In addition, the key remains the longer-term opportunity – investors remain underweight emerging markets, from both a structural and cyclical point of view.’

He added that the yield was an ‘attractive’ 4% and well-supported by the balance sheet.

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  • Ashmore Group PLC (ASHM.L)
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  • Associated British Foods PLC (ABF.L)
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  • Britvic PLC (BVIC.L)
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  • Ferguson Plc (FERG.L)
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  • Wincanton PLC (WIN.L)
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