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The Expert View: Centrica, Bellway & Anglo Pacific

Our daily roundup of analyst commentary on shares, including Boohoo and Merlin Entertainment.

by Michelle McGagh on Jun 13, 2018 at 05:30

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Key stats
Market capitalisation£8,382m
No. of shares out5,610m
No. of shares floating5,599m
No. of common shareholdersnot stated
No. of employees34901
Trading volume (10 day avg.)26m
Profit before tax£2,127m
Earnings per share5.97p
Cashflow per share22.16p
Cash per share47.66p

Jefferies upgrades Centrica to ‘buy’ on earnings momentum

Jefferies has raised its recommendation on British Gas-owner Centrica (CNA) following ‘material’ upgrades to earnings on the back of recent oil price rises.

Analyst Ahmed Farman upped Centrica from ‘hold’ to ‘buy’ and lifted his target price from 140p to 165p on the stock, which gained 3.4%, or 4.9p, to 149.5p.

‘While the stock has been in value territory for the last six months, we have remained on the sidelines with Centrica due to subdued earnings momentum,’ he said.

‘We now see material earnings upgrades as likely with the recent rally in power, gas, and oil prices.’

Farman added that the recent Ofgem consultation about whether to introduce a price cap was ‘unlikely’ and ‘Centrica’s ability to strengthen its balance sheet and crystallise value with disposals remains underappreciated’.

Key stats
Market capitalisation£4,075m
No. of shares out123m
No. of shares floating121m
No. of common shareholdersnot stated
No. of employees2366
Trading volume (10 day avg.)m
Profit before tax£495m
Earnings per share327.96p
Cashflow per share330.44p
Cash per share48.06p

Take profits on Bellway, says Shore Capital

Shares in Bellway (BWY) have rallied and Shore Capital believes now is the right time to take profits on the housebuilder.

Analyst Robin Hardy retained his ‘hold’ recommendation and ‘fair value’ price of £30.50 on the stock following a third quarter update that revealed weaker-than-expected and margins and included cautious comment on pricing.

Hardy said the tone of the report did not tally with the share price rally and Bellway shares slid 3.6%, or 122p, to £32.87.

‘While the net, net effect of prices, volumes and margins is likely to leave profit before tax estimates unchanged for this year, there may be more questions about momentum and sustainability,’ he said.

‘We had already expected profit before tax to flatten from next year but the consensus is more bullish and may have to rein in somewhat. The shares have already rallied by almost 15% since the end of March and as they are now more than 12% above our fair value this looks to be a good time to take some profits.’

Key stats
Market capitalisation£278m
No. of shares out181m
No. of shares floating162m
No. of common shareholdersnot stated
No. of employees10
Trading volume (10 day avg.)m
Profit before tax£32m
Earnings per share5.88p
Cashflow per share7.64p
Cash per share4.48p

Peel Hunt: higher coal prices boost Anglo Pacific

Peel Hunt has upgraded Anglo Pacific (APF) on the back of higher coal prices, lifting revenues and cashflow at the miner.

Analyst Peter Mailin-Jones raised his recommendation from ‘add’ to ‘buy’ and increased the target price from 181p to 190p on the stock, which weakened 0.3%, or 0.5p, to 154p.

‘Coal prices have been higher than expected over the past few months, due partly to logistics issues in a range of countries,’ he said.

‘Demand has also been strong in Chinese steel output, and notably Chinese coal burn in power generation. This has driven an increase to our coal price estimates, lifting Anglo Pacific’s revenue and cashflows.’

He said that this combined with recent share price weakness had led to the upgrade.

Key stats
Market capitalisation£2,507m
No. of shares out1,149m
No. of shares floating713m
No. of common shareholdersnot stated
No. of employees2126
Trading volume (10 day avg.)9m
Profit before tax£54m
Earnings per share2.72p
Cashflow per share4.03p
Cash per share12.40p

Liberum downgrades Boohoo on valuation

Liberum has downgraded online fashion retailer Boohoo (BOO), which it believes trades at a premium to its ‘intrinsic value’.

Analyst Adam Tomlinson downgraded his recommendation from ‘buy’ to ‘hold’ with a target price of 220p on the stock, which shed 2p, or 1%, to 218p.

The company reported ‘encouraging’ first quarter results but Tomlinson believed the shares were still trading at above its 0.4 times enterprise value’

‘Boohoo has high growth on offer, but it comes at a price,’ he said. ‘Our reduced recommendation is reflective of a valuation we believe to be up with events and the fact that the competition continue to invest in their own businesses more heavily in percentage terms, which we see as a potential threat to Boohoo in the longer term at a time where the race is on to acquire new customers.’

Key stats
Market capitalisation£3,987m
No. of shares out1,022m
No. of shares floating702m
No. of common shareholdersnot stated
No. of employees19871
Trading volume (10 day avg.)2m
Profit before tax£474m
Earnings per share18.03p
Cashflow per share32.82p
Cash per share30.31p

Merlin’s achievements have been ‘overshadowed’, says Numis

Merlin Entertainment’s (MERL) achievements have been overshadowed by inconsistent growth, creating a buying opportunity, says Numis Securities.

Analyst Tim Barrett reiterated his ‘buy’ recommendation and target price of 454p on the stock, which edged 0.1%, or 0.6p, lower at 389p.

‘Inconsistent growth since Merlin’s IPO has overshadowed its achievements and tested the market’s confidence in the underlying business model,’ he said.

‘We view this as a buying opportunity… In our view, the structural growth opportunity in new midway brands, Legoland parks and accommodation remains compelling.’

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