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The Expert View: Antofagasta, Travis Perkins and Greggs
Our daily roundup of analyst commentary on shares, also including Aldermore and Paysafe.
by Michelle McGagh on Mar 17, 2016 at 05:00
Jefferies wary of Antofagasta buys
Jefferies is wary that Antofagasta (ANTO) could compound investors’ disappointment at a cancelled dividend with expensive assets.
The Chilean copper miner on Tuesday announced it would not pay a final dividend, joining a raft of miners to have suspended or cut payouts due to the commodities crunch. The shares are down 7.5%, at 490.6p, since news of the cut.
Analyst Christopher LaFemina retained his ‘hold’ recommendation and increased the target price from 425p to 450p, but warned any asset buys could be costly.
‘While the chief executive noted that management hasn’t seen many acquisition opportunities in copper, we remain concerned Anto could be an asset buyer,’ he said.
‘Anto paid a premium multiple for [Chilean mine] Zaldivar last year. With Chilean copper assets of higher quality than Zaldivar now for sale… we would expect Anto to explore asset purchases.
‘As we have seen with recent transactions, quality copper assets sell for premium multiples. We prefer to own asset sellers versus asset buyers.’
Greggs upgraded on boosted roll-out plans
Baker Greggs (GRG) has been upgraded despite having a tough act to follow this year after a positive 2015.
Berenberg analyst Sam England upgraded his ‘sell’ recommendation to a ‘hold’ and increased the target price from 925p to £10.20. The shares rose 10p to £10.82 yesterday.
‘While Greggs had a strong 2015 on the back of good like-for-like sales, UK leisure names in our coverage have pulled back strongly in 2016 year-to-date, with Greggs down 18%, The Restaurant Group down 42% and Cineworld down 12%,’ he said. ‘However, we believe after Greggs’ 2015 results this month that it has addressed some of our key concerns, leading us to take a more positive stance.’
England said he had been concerned about the limited store roll-out ‘with plans to increase the store base from 1,700 sites capped at 2,000’.
‘However, with Greggs announcing in its full-year results that it was planning to increase its site base “substantially beyond” 2,000 sites we think growth could be higher than our original expectation,’ he said.
‘With the company’s forays into franchised stores in transport hubs and service stations proving successful, management believes it can roll out substantially more than the 105 currently in operation, supporting medium-term top line growth.’
Travis Perkins: upside for shareholders
Builders merchants Travis Perkins (TPK) will see a pick up in the short-term as housing transactions improve.
Liberum analyst Charlie Campbell retained his ‘buy’ recommendation and target price of £22.00 on the shares, which rose 2p to £18.00 yesterday.
‘The short term will see better trends in repair, maintenance and improvements (RMI) as housing transactions are growing again, and should benefit as costs drop out at the end of 2015,’ he said.
‘We also expect the second phase of RMI recovery to materialise as re-mortgaging picks up. The longer term should see the success of the five-year plan to drive sector leading growth and returns. At 13x 2016 estimated price/earnings ratio very little of this is priced in. We see over 26% total shareholder return upside to our £22.00 target price.’
Paysafe revenue up but no divi declared
Despite better-than-expected revenue mobile payments company Paysafe (PAYS) has still not declared a dividend.
Shore Capital analyst Robin Speakman has no recommendation on the stock but said there had been ‘positive momentum for the current year’.
‘Full-year 2015 saw a year dominated by acquisitive strategic development and growth… revenues for the year at $613 million benefited from a stronger foreign exchange basket translation into US dollars and came in $9 million above our expectation,’ he said. The shares rose 2.7% to 404.1p yesterday.
‘We had hoped to see a dividend declaration for full-year 2015 with the company maturing rapidly, being cash generative at an underlying level and now being a FTSE 250 stock.
‘This has not yet transpired and no guidance on a dividend policy is referred to in the statement. We maintain an expectation, however, that Paysafe will commence dividend payments for the current year as a measure of management’s confidence in the group’s prospects and of financial discipline.’
Balance sheet growth means upgrade for Aldermore
Challenger bank Aldermore (ALD) has been upgraded thanks to its conservative approach to its finances and balance sheet prospects.
Peel Hunt analyst Anthony Da Costa upgraded his recommendation from ‘add’ to ‘buy’ and increased the target price from 225p to 235p. The shares rose 3.4% to 226.4p yesterday.
‘Aldermore’s diversified funding base supports growth across both small and medium-sized enterprises and specialist residential lending, and the delay in interest rate rises is expected to support net interest margins at 2015 levels,’ he said.
‘We upgrade 2016/2017 estimated profit before tax by 4%/5% and increase our target price by 4% to 235p. Aldermore is conservatively provisioned and offers exposure to balance sheet growth but with 11% price upside.’
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Look up the shares
- Antofagasta PLC (ANTO.L)
- Travis Perkins PLC (TPK.L)
- Paysafe Group PLC (PAYS.L)
- Greggs PLC (GRG.L)
- Aldermore Group PLC (ALD.L)