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The Expert View: Boohoo, Domino’s and Britvic

Out daily roundup of analyst commentary on shares, also including Berendsen and WPP.

by Michelle McGagh on Jun 09, 2017 at 05:00

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Key stats
Market capitalisation£2,919m
No. of shares out1,123m
No. of shares floating652m
No. of common shareholdersnot stated
No. of employees1301
Trading volume (10 day avg.)11m
Profit before tax£24m
Earnings per share2.16p
Cashflow per share2.59p
Cash per share6.26p

Jefferies: Boohoo cementing growth potential with new warehouse

Plans for an equity raise to fund a new warehouse at online retailer Boohoo (BOOH) prove this is an exciting investment story, says Jefferies.

Analyst Caroline Gulliver retained her ‘buy’ recommendation after the company beat first quarter 2018 sales estimates by 30% and raised full-year 2018 guidance to c.60% sales growth.

Gulliver also noted the £50 million equity raise being planned by Boohoo as a nod towards the expected future growth.

‘Boohoo has good momentum with all brands and regions showing an acceleration in growth since the fourth quarter of 2017,’ she said.

‘To provide extra capacity for future growth, Boohoo plans to construct a new 600,000 square foot warehouse funded by a £50 million equity raise and cashflow. With trading momentum on their side, this makes for an exciting investment story.’

At the time of writing, the shares were trading up 8.6%, or 18.8p, at 239p.

Key stats
Market capitalisation£1,869m
No. of shares out264m
No. of shares floating259m
No. of common shareholdersnot stated
No. of employees4358
Trading volume (10 day avg.)2m
Profit before tax£115m
Earnings per share43.50p
Cashflow per share62.31p
Cash per share78.33p

Britvic sales fizzing but profit going flat, says Berenberg

Berenberg believes drinks manufacturer Britvic (BVIC) is fairly valued despite strong sales as headwinds continue to affect profit growth.

Analyst Ned Hammond retained his ‘hold’ recommendation and target price of 725p on the stock after interim results that showed revenues up 11.5% and earnings up 6.7%. The shares were trading up 0.5%, or 4p, at 708p at the time of writing.

‘This strong revenue increase was partly fuelled by foreign exchange but the company did deliver constant currency sales growth in all its core markets,’ he said.

‘However, with foreign exchange headwinds continuing to have an impact on margins and marketing spend weighted to the second half of the year, profit growth is still likely to be minimal this year. While we have increased our full-year 2017 earnings per share estimate a small amount and we think risk to full-year numbers is skewed slightly to the upside, we feel that Britvic currently looks fairly valued.’

Key stats
Market capitalisation£1,573m
No. of shares out492m
No. of shares floating486m
No. of common shareholdersnot stated
No. of employees911
Trading volume (10 day avg.)2m
Profit before tax£65m
Earnings per share12.93p
Cashflow per share14.41p
Cash per share4.75p

Opportunities for Domino’s investors, says Numis

Investors in Domino’s (DOM) have the potential to benefit from the listing of Domino’s Eurasia in the UK next month, says Numis.

Analyst Richard Stuber retained his ‘buy’ recommendation and target price of 510p on the stock prior to Domino’s Eurasia - which covers Turkey, Russia, Georgia and Azerbaijan - listing in the UK on 3 July.

He said investors would ‘potentially be able to gain exposure through seven different equity vehicles’ that make up Domino’s and while ‘we only have active coverage of DOM, the peer group’s valuation metrics, adjusted for business mix, support our “buy” recommendation’.

Since Domino’s interim results in March shares are down more than 20% but Stuber is focusing on ‘the combination of encouraging updates from the Nordics, comments on progress towards a more efficient balance sheet, and wider investor interest as a result of the imminent IPO’ which should support the share price.

Note: Domino's completed a 3-for-1 share split last year.

Key stats
Market capitalisation£2,129m
No. of shares out173m
No. of shares floating167m
No. of common shareholdersnot stated
No. of employees15700
Trading volume (10 day avg.)1m
Profit before tax£91m
Earnings per share53.22p
Cashflow per share167.20p
Cash per share179.66p

Berendsen shares up after £2.2bn takeover offer

Shares in dry cleaners Berendsen (BRSN) shot up after French laundry services group Elis made a £2.2 billion offer for the company.

Peel Hunt analyst Christopher Bamberry retained his add recommendation and increased the target price from 908p to £12.50p to reflect the offer. Shares were trading up 8.8%, or 98p, at £12.05 at the time of writing.

‘The boards of Elis and Berendsen have reached agreement in principle on a possible offer, which values each Berendsen share at £12.50 - 7% above the value of the initial proposal,’ he said.

‘The price represents a 45% premium to the close price on 17 May and equates to 18.6x 2018 estimated earnings per share and 7.3x 2018 estimated earnings.’

He added Berendsen had indicated to Elis that it expected to recommend the deal to shareholders.

Key stats
Market capitalisation£20,790m
No. of shares out1,275m
No. of shares floating1,227m
No. of common shareholdersnot stated
No. of employees198000
Trading volume (10 day avg.)4m
Profit before tax£1,400m
Earnings per share108.00p
Cashflow per share148.87p
Cash per share190.26p

WPP positioned for success, says Shore Capital

Shore Capital ‘remains positive’ on the prospects for advertising agency WPP (WPP) despite concerns about a slowdown in the sector.

Analyst Roddy Davidson retained his ‘buy’ recommendation after WPP published a trading update focusing on the first four months of the year. Revenue was up 3.4% over the period, with sales and profits above budget and new business being announced.

Davidson said the update did not contain any ‘significant surprises’ and ‘despite a degree of caution on global economic developments, we remain positive on WPP’s prospects’.

‘Specifically, we believe the strength and quality of its operations and brands, its international footprint, record of innovation and industry-leading new business wins, cost focus, and overweight exposure versus its peers to digital and less well-developed regions means it is well placed to tap into solid medium-term growth in global advertising spend,’ he said.

WPP shares were trading flat at £16.38 at the time of writing.

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Look up the shares

  • Boohoo.Com PLC (BOOH.L)
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  • Britvic PLC (BVIC.L)
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  • Domino's Pizza Group PLC (DOM.L)
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  • Berendsen PLC (BRSN.L)
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