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The Expert View: Balfour Beatty, NMC Health and DFS

Our daily roundup of analyst commentary on shares, also including Arix Bioscience and Phoenix Spree Deutschland.

by Michelle McGagh on Dec 22, 2017 at 05:00

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Key stats
Market capitalisation£1,987m
No. of shares out690m
No. of shares floating687m
No. of common shareholdersnot stated
No. of employees21829
Trading volume (10 day avg.)2m
Profit before tax£130m
Earnings per share0.29p
Cashflow per share7.75p
Cash per share111.45p

Balfour Beatty is Numis top pick

Balfour Beatty (BALF) has sold off part of an M25 investment, which Numis says puts the infrastructure group in ‘prime position’ to exploit markets in the UK and US.

Analyst Howard Seymour retained his ‘buy’ recommendation and target price of 350p on the stock after the partial sale of Connect Plus, an M25 public-private partnership equity investment, for £103 million.

He said the directors achieved more for the investment than thought, demonstrating ‘the excellent track record and group strategy for selling mature assets’. Seymour added that the proceeds would be used to pay down debt that ‘provides the group with the best balance sheet in the sector’.

‘Together with management actions to date this puts Balfour Beatty in prime position in the UK and US to exploit strong market outlooks,’ he said.

‘We retain target price and view that Balfour Beatty offers the best recovery profile coupled with balance sheet in the sector, making it a top pick going into 2018.’

The shares rose 2.2% to 297.8p yesterday.

Key stats
Market capitalisation£5,754m
No. of shares out204m
No. of shares floating85m
No. of common shareholdersnot stated
No. of employees11252
Trading volume (10 day avg.)m
Turnover913m USD
Profit before tax185m USD
Earnings per share0.53 USD
Cashflow per share0.83 USD
Cash per share2.26 USD

NMC in rude health, says Berenberg

Berenberg feels private healthcare provider NMC Health (NMC) has addressed any concerns in a conference call and clarified its strategy.

Analyst Charles Weston reiterated his ‘buy’ recommendation and target price of £40.00 on the shares, which rose 2.9% to £28.17 yesterday.

He said the company mentioned a new contract in Egypt that could result in a 2% earnings per share upgrade as well as plans to develop paediatrics, but did not expect the company to make use of its $800 million war chest for acquisitions.

‘The United Arab Emirates and Saudi Arabia healthcare budget forecasts are strong but do not include infrastructure investment,’ he said.

‘Consumer uptick in Dubai is very strong, and new beds are being rolled out in NMC Royal. In IVF, Spain continues to perform well, and Fakih IVF continues its national roll-out, with the expectation of entering Saudi Arabia with this business in 2018.’

Key stats
Market capitalisation£410m
No. of shares out212m
No. of shares floating206m
No. of common shareholdersnot stated
No. of employees4354
Trading volume (10 day avg.)m
Profit before tax£82m
Earnings per share18.61p
Cashflow per share28.92p
Cash per share28.84p

DFS to benefit from Steinhoff woes, says Peel Hunt

Peel Hunt has upgraded DFS (DFSD) as it believes the furniture retailer could benefit from the problems at Steinhoff-owned Harveys.

Analyst Jonathan Pritchard upgraded his recommendation from ‘reduce’ to ‘hold’ with a target price of 200p on the shares, which rose 1.6% to 193.8p yesterday.

He said the problems at Steinhoff had impacted DFS rivals Harveys and Bensons for Beds. This could hit Boxing Day sales, which he said was ‘akin to Santa phoning in sick next Monday’.

‘The chief beneficiary of any change in behaviour surrounding Harveys is likely to be DFS, and this may be a get-out-of-jail-free card for a retailer that we don’t think is really firing on all cylinders right now,’ said Pritchard.

‘The probability of a switch in trade to DFS makes our lowly like-for-like assumption and ‘reduce’ recommendation look too bearish. Upgrade to ‘hold’.’

Jefferies positive on Arix’s latest investment

Jefferies is backing Arix Bioscience’s (ARIX) investment in Atox Bio, which is developing treatment for kidney injury.

Analyst Ken Rumph retained his ‘buy’ recommendation and increased the target price from 245p to 268p. The shares fell 1.9% to 184p yesterday.

Neil Woodford-backed Arix led an oversubscribed financing round for Atox Bio as part of its goal to bring its portfolio of investments to 12 by the end of this year, which it has done.

‘Anyone can invest, but we see the portfolio as coherent, diverse in stage, and high quality, and modestly valued - Atox ends the year on another high note,’ he said.

‘Our price target and projected full year 2017 net asset value were based on the expectation that Arix’s management will be able to invest around £55 million into well-received business in full year 2017, and continue in full year 2018.’

German property fund primed for Berlin boost

Property investment trust Phoenix Spree Deutschland (PSDL) is selling a portfolio of 34 properties for €73 million (£65 million) meaning it is now focused geographically on Berlin, which Liberum said put it in a strong position.

The properties were acquired in 2006/07 for €38.7 million and the sale price represents a 26% premium to the June 2017 valuation. Berlin now represents 99% of the portfolio by value.

Analyst Conor Finn said the company is now ‘almost entirely focused on the high-growth Berlin market where investment demand remains very strong, as evidenced by [this week’s] takeover of Taliesin Property Fund’.

‘The outlook for long-term rental growth in the Berlin residential market is underpinned by market dynamics with demand well ahead of supply,’ he said. ‘Phoenix Spree Deutschland trades on a 19.4% premium to the June 2017 NAV and we expect strong performance in [the second half of its 2017 financial year] due to the strength of investment demand, rental growth...and [the]...disposal.’

The shares rose 3.2% to 366.2p yesterday.

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  • Balfour Beatty PLC (BALF.L)
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  • NMC Health PLC (NMC.L)
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  • DFS Furniture PLC (DFSD.L)
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  • Arix Bioscience PLC (ARIX.L)
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  • Phoenix Spree Deutschland Ltd (PSDL.L)
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