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The Expert View: Barclays, Taylor Wimpey and Sky

Our daily roundup of analyst commentary on shares, also including N Brown and Senior.

by Michelle McGagh on Apr 27, 2018 at 05:00

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Key stats
Market capitalisation£35,825m
No. of shares out17,069m
No. of shares floating17,013m
No. of common shareholdersnot stated
No. of employees79900
Trading volume (10 day avg.)56m
Turnover£13,631m
Profit before tax£7,937m
Earnings per share9.71p
Cashflow per share20.74p
Cash per share1,224.49p

Barclays results not a disaster, says Hargreaves

A first quarter loss at Barclays (BARC) is a disappointment but not a disaster, says Hargreaves Lansdown.

The bank posted a pre-tax loss of £236 million due to a £1.4 billion settlement with the US Department of Justice and £400 million of additional payment protection insurance compensation claims.

Analyst Laith Khalaf said while there was ‘a lot not to like’ about the results, many of the issues were one-offs and stripping these out ‘performance has been a disappointment rather than a disaster’.

He added that beyond litigation, the bank was hampered by a weak dollar and ‘lacklustre’ performance in UK banks.

‘Barclays plans to pay a 6.5p dividend this year, which represents a yield of around 3%...that would be a return to where the dividend was before it was halved in 2016, but for income-seekers that still compares unfavourably to what’s on offer from Lloyds and HSBC,’ said Khalaf.

‘Barclays therefore has to show some growth credentials to attract investors, and there’s not too much evidence of that in its latest trading figures.’

The shares fell 1.4% to 210p yesterday.

Key stats
Market capitalisation£6,226m
No. of shares out3,276m
No. of shares floating3,251m
No. of common shareholdersnot stated
No. of employees5183
Trading volume (10 day avg.)12m
Turnover£3,965m
Profit before tax£837m
Earnings per share16.93p
Cashflow per share17.03p
Cash per share18.33p

Liberum: strong sales at Taylor Wimpey but better value elsewhere

The second half of the year should provide a boost to house builder Taylor Wimpey (TW) but Liberum still sees more value in the smaller builders.

Analyst Charlie Campbell retained his ‘hold’ recommendation and target price of 190p on the stock after Taylor Wimpey reported ‘strong sales for the first four months of the year’ although slower than the same period last year which was a ‘very strong comparator’.

‘The group is confident of achieving expectations but has noted that the year will be second-half weighted due to delays in production caused by the adverse weather of March,’ he said.

‘The shares trade close to our fair value, trading at 1.9x book value and yielding 8%. Of the larger stocks we prefer Persimmon, but still see more value in the smaller builders: Bellway, Galliford Try, Gleeson, and Redrow.’

The shares fell 1.5% to 190p yesterday.

Key stats
Market capitalisation£23,306m
No. of shares out1,719m
No. of shares floating996m
No. of common shareholdersnot stated
No. of employees28123
Trading volume (10 day avg.)3m
Turnover£12,916m
Profit before tax£2,136m
Earnings per share39.97p
Cashflow per share95.63p
Cash per share145.43p

Sky shareholders should sit tight, says Shore Capital

Shore Capital believes there is a possibility that Fox will come back with an increased bid for Sky (SKYB) following the formalisation of a rival bid from Comcast.

Analyst Roddy Davidson retained his ‘hold’ recommendation on the stock after Comcast formalised its £12.50 cash offer. The shares were flat at £13.59 yesterday.

Davidson said the stock was ‘already trading at a c.9% premium to Comcast’s offer’ so there is ‘a clear expectation among investors that Fox will return with an improved proposition’.

‘We would certainly not rule out this possibility but are mindful that Fox’s own circumstances have changed materially since its initial original approach,’ he said.

‘On the balance of probability we believe shareholders should sit tight, while being mindful of the downside risk that Fox could decide to walk away.’

Key stats
Market capitalisation£584m
No. of shares out283m
No. of shares floating146m
No. of common shareholdersnot stated
No. of employees2742
Trading volume (10 day avg.)1m
Turnover£901m
Profit before tax£71m
Earnings per share15.66p
Cashflow per share25.41p
Cash per share22.62p

N Brown valuation remains unchallenging, says Peel Hunt

Peel Hunt is expecting a ‘protracted recovery’ at specialist clothing retailer N Brown (BWNG), which owns Simply Be and Jacamo, but believes the valuation is not challenging.

Analyst John Stevenson retained his ‘hold’ recommendation and reduced the target price from 275p to 250p after final results came in marginally ahead of market expectations. The shares rose 6% to 205.6p yesterday.

‘Current trading has been challenging but on an improving trend, a point that reflects the wider apparel market and weather conditions,’ he said.

‘Trading on a price/earnings ratio of 9x and offering a secure yield of 7%, the shares should pick up on [the] results. We still think there is downside risk to margins and we see a fairly protracted recovery process, but with no material threat to forecasts the valuation is far from challenging.’

Key stats
Market capitalisation£1,236m
No. of shares out419m
No. of shares floating416m
No. of common shareholdersnot stated
No. of employees7454
Trading volume (10 day avg.)1m
Turnover£1,023m
Profit before tax£123m
Earnings per share10.50p
Cashflow per share24.23p
Cash per share3.00p

Jefferies predicts Senior earnings recovery

Engineering company Senior (SNR) has scope for a ‘meaningful’ longer term earnings recovery, according to Jefferies.

Analyst Andy Douglas retained his ‘buy’ recommendation and target price of 324p on the stock after a ‘very solid’ trading update that highlighted ‘decent progress and confidence in the group’s outlook’.

‘Year-to-date trading has been in line with management’s expectations across both divisions,’ he said. ‘The outlook commentary is solid, with unchanged full-year expectations and management remains optimistic about the group over the near and medium-to-long term.’

Douglas added that Senior had ‘an attractive outlook and there is still scope for meaningful medium-to-long-term sales growth...and earnings margin recovery...we continue to see scope for a strong, medium-term earnings recovery’.

The shares fell 0.8% to 293.8p yesterday.

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  • Barclays PLC (BARC.L)
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  • N Brown Group PLC (BWNG.L)
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  • Senior PLC (SNR.L)
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  • Sky PLC (SKYB.L)
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  • Taylor Wimpey PLC (TW.L)
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