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The Expert View: AstraZeneca, Sky and Foxtons

Our daily roundup of analyst commentary on shares, also including Land Securities and Tate & Lyle.

by Michelle McGagh on Jul 28, 2017 at 05:00

If you would like to receive news alerts on any of the stocks mentioned in The Expert View, click on the star icons below to add them to your favourites.
Key stats
Market capitalisation£54,444m
No. of shares out1,266m
No. of shares floating1,261m
No. of common shareholdersnot stated
No. of employees59700
Trading volume (10 day avg.)3m
Turnover17,663m USD
Profit before tax2,687m USD
Earnings per share2.12 USD
Cashflow per share3.47 USD
Cash per share3.58 USD

Astra lung cancer drug trial disappoints

AstraZeneca (AZN) shares suffered after its Mystic trial for its lung cancer drug failed, but Hargreaves Lansdown said there were other drugs to fall back on.

Shares in the pharmaceutical giant fell 15.6% to £43.16 after it announced the trial’s failure to meet its target endpoints alongside half-year results.

‘Analysts have been waiting for the numbers from the Mystic trial for months and had, admittedly tentatively, booked in billions of dollars of future sales from the combination therapy. Those healthcare billions will now be going elsewhere,’ said analyst Nicholas Hyett.

Although Hyett said the half-year results showed improving profits, the numbers ‘only serve to remind investors just how important it is for Astra to get new drugs off the ground’.

Astra is facing falling product sales and cost cutting will only help the company so much. ‘Mystic is far from being the only trial going through Astra’s labs, but the failure of the group’s most high profile trial will still be a body blow,’ he added.

Key stats
Market capitalisation£8,141m
No. of shares out791m
No. of shares floating785m
No. of common shareholdersnot stated
No. of employees583
Trading volume (10 day avg.)2m
Turnover£787m
Profit before tax£113m
Earnings per share14.29p
Cashflow per share14.79p
Cash per share3.79p

Numis: Land sells Walkie Talkie making ‘healthy profit’

Real estate investment trust Land Securities (LAND) has confirmed the sales of the ‘Walkie Talkie’ building in London, which Numis said was a ‘sensible decision’ and will have a positive impact on the trust’s discount.

Analyst Robert Duncan retained his ‘hold’ recommendation and target price of £10.25 on the stock, after the property company made a deal to sell 20 Fenchurch Street to Hong Kong conglomerate LKK Health Products for £1.3 billion.

Duncan said this represented a ‘healthy profit on what has been a successful development’.

‘The sale is expected to add c.30p to net asset value and c.1 percentage point to earnings per share. While this has been well flagged and so shouldn’t be a major surprise for investors, the price secured and Land’s decision to return capital should be taken positively and we would expected positive momentum in the shares from the current 30% discount to net asset value,’ he said.

However, he added that there were ‘unlikely to be any major acquisition opportunities over the next year or two’.

Key stats
Market capitalisation£3,172m
No. of shares out466m
No. of shares floating457m
No. of common shareholdersnot stated
No. of employees4146
Trading volume (10 day avg.)2m
Turnover£2,753m
Profit before tax£255m
Earnings per share54.12p
Cashflow per share85.74p
Cash per share56.17p

US agreement sweetens case for Tate & Lyle

The US decision to allow more foreign sugar to be imported should be positive for Tate & Lyle (TATE) but Jefferies said investors should keep an eye on the company.

Analyst Martin Deboo retained his ‘hold’ recommendation and target price of 800p on the stock, which was trading up 2.6%, or 17.5p, at 689p yesterday.

‘Full-year 2018 has got off to an encouraging start, with North American starch volumes back in positive territory and firmer commentary on bulk sweetener margins. While there is a way to go in full-year 2018, and a fresh pricing round still to navigate, we see it all as consistent with our modestly ahead-of-market numbers,’ he said.

Deboo added that there was ‘plenty of valuation support at this level’.

‘The downshift in the shares since the positive news on the [US] sugars suspension agreement on 6 June has surprised us,’ he said.

Key stats
Market capitalisation£16,593m
No. of shares out1,719m
No. of shares floating1,002m
No. of common shareholdersnot stated
No. of employees26982
Trading volume (10 day avg.)6m
Turnover£11,965m
Profit before tax£666m
Earnings per share38.70p
Cashflow per share94.60p
Cash per share124.32p

Sky results ‘academic’ as Fox bid faces scrutiny

Weak subscriber growth and increased churn are a concern to Sky (SKY) but the shares could come under real pressure if the competition authorities peer too much at the bid from Fox, says Liberum.

Analyst Ian Whittaker reiterated his ‘hold’ recommendation and target price of £10.60 on the stock after full year numbers. He said while the results beat expectations at adjusted earnings per share level, the broadcaster’s key performance indicators did ‘not look good’.

This was due to ‘weak subscriber growth in the UK and increased churn in UK/Ireland and Germany/Austria’ as well as ‘stagnating’ average revenue per user numbers.

The real concerns lay around the Fox bid for Sky, he added.

‘In some ways, the results are academic as the main driver for the share price is the Fox bid,’ he said. ‘Our view is that the bid is likely to go through, with it unlikely that issues of news plurality will be enough to block the bid. However, with the bid likely to come under review from the Competition Authorities and subject to political approval, if there are any concerns the bid will not go through, the shares could come under pressure as investors focus more on the fundamentals.’

Shares were trading down 0.1%, or 1p, at 965p at the time of writing.

Key stats
Market capitalisation£252m
No. of shares out275m
No. of shares floating248m
No. of common shareholdersnot stated
No. of employees1337
Trading volume (10 day avg.)m
Turnover£133m
Profit before tax£16m
Earnings per share5.70p
Cashflow per share7.53p
Cash per share3.45p

Bad news continues for Foxtons, says Peel Hunt

Estate agents Foxtons (FOXT) has struggled with a tough London property market in the first half of the year and next year will bring further headwinds, says Peel Hunt.

Analyst Gavin Jago retained his ‘sell’ recommendation and reduced the target price from 80p to 60p after a ‘challenging’ London sales market that ‘weighed significantly on first-half profits’ with earnings 46% lower than last year.

Jago does not expect improvements in the second half of the year, and predicted Foxtons would face further problems next year when the government introduces the letting fees ban.

‘Of course, operational gearing works in both directions, but we see no near-term catalyst for an improvement in trading and have reduced our full-year 2017 profit before tax by c.35% and halved our dividend forecasts to 1p,’ he said.

‘From 2018, the group will face a further headwind from the lettings fee ban. On revised numbers, the shares trade on a full year 2017 price-earnings ratio of c.35x.’

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  • AstraZeneca PLC (AZN.L)
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  • Land Securities Group PLC (LAND.L)
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  • Tate & Lyle PLC (TATE.L)
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  • Sky PLC (SKYB.L)
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  • Foxtons Group PLC (FOXT.L)
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