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The Expert View: Barclays, Rolls-Royce and Booker

Our daily roundup of analyst commentary on shares, also including Zoopla and Shaftesbury.

by Sam Antrobus on Feb 08, 2016 at 05:00

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Key stats
Market capitalisation£29,223m
No. of shares out16,807m
No. of shares floating16,521m
No. of common shareholdersnot stated
No. of employees132300
Trading volume (10 day avg.)52m
Profit before tax£-174m
Earnings per share-1.07p
Cashflow per share13.01p
Cash per share240.61p

*Correct as at 5 Feb 2016

Barclays could be forced to axe dividend

Barclays (BARC) could be forced to axe divided payments in the next two years in order to shore up its balance sheet, according to Jefferies

The bank is currently yielding 3.7%, having paid out 6.5p in dividends a year since 2012. So far 3p in interim dividends have been paid out for 2015, with the year’s final payment to be announced next month.

Analyst Joseph Dickerson a 1p fourth quarter dividend will bring the 2015 payout to just 4p, and believes the payments should be axed in 2016 and 2017.

‘We believe a dividend cut would go a long way to assuaging investor concerns about the capital position of the bank,’ he said.

He flagged the flat-lining of the bank’s tier one capital ratio (CET1), a common gauge of a bank’s strength.‘Given the reduced earnings profile of the bank and limited insight into any further efforts to reduce the risk weighted asset base of the group’s non-core business, we now believe it unlikely to sustain ordinary dividend pay-outs in 2016 and 2017,’ he said.

Dickerson maintained his ‘buy’ rating but cut his price target from 357p to 287p. The shares were flat at 173.4p on Friday.

Key stats
Market capitalisation£2,989m
No. of shares out1,770m
No. of shares floating1,614m
No. of common shareholdersnot stated
No. of employees12814
Trading volume (10 day avg.)4m
Profit before tax£118m
Earnings per share6.63p
Cashflow per share7.83p
Cash per share8.38p

*Correct as at 5 Feb 2016

Dip in retail trading at Booker worries Shore Capital

Despite a recent store sell-off, Shore Capital are more concerned over slowing trading momentum at wholesaler Booker (BOK).

Analyst Clive Black retained a ‘hold’ stance, but does not have a target price on the shares, which were flat at 168.5p on Friday.

‘The leading British wholesaler has surprised us a little by selling 15 Budgens stores in the south and east of England to the Co-op. Charles Wilson [chief executive] most certainly knows what he is doing and so there will be good reason for the transaction albeit Booker is not an organisation that is short of cash,’ he said.

‘A recent dip in retail trading momentum at Booker retail – reflecting we sense an amalgam of poor footfall, deflation, the tobacco advertising ban and a general easing in convenience sales momentum – has worried us and is certainly contributing to the end of the upward momentum of the stock.

‘Whilst prodigiously cash generative, with attractive dividend credentials – ordinary and special – our enthusiasm for Booker’s stock is a little muted at this time until we more thoroughly understand the revenue dynamics of the business.’

Key stats
Market capitalisation£9,814m
No. of shares out1,839m
No. of shares floating1,824m
No. of common shareholdersnot stated
No. of employees50600
Trading volume (10 day avg.)7m
Profit before tax£-73m
Earnings per share-3.90p
Cashflow per share35.01p
Cash per share150.81p

*Correct as at 5 Feb 2016

Deutsche urges Rolls to axe payouts

Shares in under-pressure engine manufacturer Rolls-Royce (RR) remain expensive according to Deutsche Bank, with a potential dividend cut looming on the horizon.

Analyst Benjamin Fidler retained a ‘sell’ recommendation, with a target price of 430p on the shares, which rose 10.7p to 533p on Friday.

‘Rolls reports 2015 results on 12 February and numbers will be of marginal relevance, with the focus instead being on potential changes to 2016 outlook,’ he said.

‘Following the last profit warning in November, a potential dividend cut was floated but remains unconfirmed.

Consensus analyst forecasts assume a 30% cut to dividend per share to 17p in 2015 and 2016, although the derivative market is currently implying a dividend-per-share of 8p.

‘Arguably, with negative near-term cash flow (2015 to the end of 2017) and with earnings per share falling 50% in 2016, cutting the dividend entirely for a short period may be the most prudent move, but we will see what management decide.’

Key stats
Market capitalisation£2,388m
No. of shares out278m
No. of shares floating264m
No. of common shareholdersnot stated
No. of employees23
Trading volume (10 day avg.)m
Profit before tax£467m
Earnings per share167.37p
Cashflow per share167.51p
Cash per share1.44p

*Correct as at 5 Feb 2016

Strong Q1 points to a good 2016 for Shaftesbury

Following an extremely positive first quarter update, further rental growth over the year ahead is predicted for real estate investment trust Shaftesbury (SHB).

Liberum analyst David Brockton retained a ‘buy’ recommendation, with a target price of £10.40 on the shares, which were flat at 847p on Friday.

‘Shaftesbury’s Q1 confirms another robust period of positive footfall and spend across the portfolio, supporting sustained strong tenant demand,’ he said.

‘This should underpin another year of good rental growth. Vacancy levels remain extremely low at 2.0% (as at December 2015), albeit up slightly from 1.6% in September 2015, with 0.3% under offer.

‘Cost of debt has reduced by 10 basis points since year-end as the group draws on lower cost facilities to progress acquisitions and developments. The valuation now offers a rare opportunity to buy into this consistent long-term performer at a discount to net asset value.’

Key stats
Market capitalisation£883m
No. of shares out418m
No. of shares floating201m
No. of common shareholdersnot stated
No. of employees303
Trading volume (10 day avg.)m
Profit before tax£25m
Earnings per share6.04p
Cashflow per share7.01p
Cash per share4.59p

*Correct as at 5 Feb 2016

Zoopla sees off competition

Berenberg believes that while new competition has provided online property group Zoopla (ZPLAZ) with plenty to think about, market concerns have been exaggerated.

Analyst Robert Berg retained a ‘buy’ recommendation, with a target price of 300p on the shares, which fell 2% to 206p on Friday.

‘In a recent marketing press release, Zoopla stated that it is seeing record numbers of agents leaving OTM [OnTheMarket], to re-join Zoopla as members,’ he said .

‘While OTM has achieved the support of 6,500 estate and letting agent offices (of which over 10% are on a non-binding letter of intent), Zoopla has 12,702.

‘We fully agree that OTM is a disruptor to what is a solid structural growth and margin development story. However, recent data points confirm our view that this is a blip in the growth trajectory and by no means the start of the end.’

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Look up the shares

  • Barclays PLC (BARC.L)
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  • Rolls-Royce Holdings PLC (RR.L)
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  • Shaftesbury PLC (SHB.L)
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  • Booker Group PLC (BOK.L)
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  • Zoopla Property Group PLC (ZPLAZ.L)
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