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The Expert View: Centrica, Ocado and Carillion

A round-up of analyst notes, including their take on Northbridge Industrial Services and Brooks Macdonald.

by Harry Brooks on Jan 24, 2012 at 05:01

We’ve rounded up some of the best comment from top analysts to give you their views on Centrica, Ocado, Carillion, Northbridge Industrial Services and Brooks Macdonald.

Key stats
Market capitalisation£14,498m
No. of shares out5,170m
No. of shares floating4,926m
No. of common shareholdersnot stated
No. of employees34969
Trading volume (10 day avg.)10m
Profit before tax£1,873m
Earnings per share36.08p
Cashflow per share53.30p
Cash per share9.51p

*Correct as at 23 Jan 2012

Liberum Capital backs battered Centrica to mount a comeback

Dominic Nash, analyst at Liberum Capital, has put a 'buy' recommendation on Centrica (CNA.L) following a year in which the utility company failed to equal its rivals' success.

Centrica's share price fell by 13% over the course of 2011, while the sector as a whole gained 9%. This was a result of overoptimistic analyst projections on retail profitability, higher taxes on gas and oil production, the Fukushima disaster leading to fears about the nuclear sector, and lower home services revenues, Nash said.

However, Nash said the firm is now well placed to fight back with an upstream integration strategy that could boost earnings by 10%. Furthermore, the analyst values Centrica's oil and gas assets at £1 billion above the consensus estimate, which he said equates to about 20p a share.

Nash has a price target for Centrica of 370p a share, and on Monday shares closed at 282.40p, down 0.90p.

Key stats
Market capitalisation£492m
No. of shares out562m
No. of shares floating297m
No. of common shareholdersnot stated
No. of employees4252
Trading volume (10 day avg.)3m
Profit before tax£-7m
Earnings per share-1.63p
Cashflow per share3.75p
Cash per share28.03p

*Correct as at 23 Jan 2012

Shore Capital says no bid in the offing for Ocado as CFO quits

Clive Black, analyst at Shore Capital, has put a 'sell' recommendation on internet food outlet Ocado (OCDO.L) following news that Andrew Bracey, the company's chief financial officer (CFO), has resigned.

Bracey is to join commercial services group Michael Page International (MPI.L), according to Ocado's company statement, and the hunt for a replacement is under way.

The news follows a week in which Ocado's share price climbed on rumours of a possible takeover, which Black said were 'probably unfounded'. Black was downbeat on the loss of Bracey: 'We cannot see how such a resignation can be considered anything but bad news for Ocado.'

Black made the point that Bracey's departure effectively pours water on the talk of a possible takeover, as it's unusual for a director to leave ahead of a potentially lucrative bid deal.

On Ocado's general health Black said he has growing concerns having cut his earnings forecasts 'countless times' over the past two years, and he added that the group may need to raise more money from the market to put its investment plans into practice.

Shares in Ocado fell 2p to 85.6p on Monday.

Key stats
Market capitalisation£1,400m
No. of shares out430m
No. of shares floating401m
No. of common shareholdersnot stated
No. of employees50000
Trading volume (10 day avg.)1m
Profit before tax£147m
Earnings per share36.74p
Cashflow per share52.96p
Cash per share99.25p

*Correct as at 23 Jan 2012

Oriel bullish on Carillion following school contract win

Mark Howson, analyst at Oriel Securities, has awarded construction services firm Carillion (CLLN.L) a 'buy' recommendation following news that the company has been named preferred bidder for the construction of educational facilities in Stockton on Tees worth more than £100 million.

The contract win takes the number of schools and academies that the firm is working on up to around 150, Howson noted, up from 140.

'The news that Carillion has been selected on £100 million of academy schools is welcome news, and again is another example of a sizeable contract that the market had not previously seen listed by the company in its bid pipeline,' he added.

The work was secured through the Partnerships for Schools Contractors Framework, and follows the recent financial close on the £14 million ARK Bollingbroke Academy in Wandsworth, London.

Shares in Carillion closed down 2.6p to 325p on Monday.

Key stats
Market capitalisation£38m
No. of shares out15m
No. of shares floating10m
No. of common shareholdersnot stated
No. of employees118
Trading volume (10 day avg.)0m
Profit before tax£3m
Earnings per share25.50p
Cashflow per share41.90p
Cash per share16.90p

*Correct as at 23 Jan 2012

Arbuthnot selects Northbridge as a top pick for 2012

Robert Sanders, analyst at Arbuthnot, has awarded industrial equipment firm Northbridge Industrial Services (NBI.L) a 'strong buy' recommendation (meaning it's one of his top picks for 2012) as he believes increasing health and safety legislation, together with the firm's entry into the oil and gas sector, should lead to higher profits in the year ahead.

Sanders said that these developments have the potential to close the valuation gap with the firm's obvious competitors: Aggreko (AGGK.L) and APR Energy (APREN.L).

'Even allowing for the disparity in size, we feel that a 50%+ discount on 2012 price to earnings and enterprise value to earnings before before interest, taxes, depreciation and amortisation multiples is unwarranted given management's track record of delivering profit growth both organically and through acquisitions,' the analyst said.

Sanders has a price target for the stock of 300p, and on Monday it closed at 250.00p, up 6.00p.

Key stats
Market capitalisation£121m
No. of shares out11m
No. of shares floating8m
No. of common shareholdersnot stated
No. of employees235
Trading volume (10 day avg.)0m
Profit before tax£5m
Earnings per share50.51p
Cashflow per share60.16p
Cash per share157.07p

*Correct as at 23 Jan 2012

Numis gives Brooks Macdonald 'buy' tip on growth promise

David McCann, analyst at Numis, has placed a 'buy' recommendation on asset management firm Brooks Macdonald Group (BRK.L) following the release of second-quarter results showing that funds under management (FUM) rose 7% in the period.

In December 2011 FUM hit £3.205 billion, which was 3.8% short of McCann's estimate of £3.333 billion. However, McCann said that despite this shortfall, organic growth remains strong, running at around 20%. The firm's statement said that trading is 'in line with the board's expectations'.

McCann noted that the growth in self-invested pension plans (Sipps) has provided a fillip for Brooks Macdonald. Furthermore, he said, 'the relatively recent trend for some independent financial advisers to outsource investment management to discretionary managers rather than doing it themselves' has also benefited the group.

'We believe UK demographics (ageing population) and savings trends (many people have under-saved for a number of years) are also supportive of organic growth,' McCann concluded.

Shares in Brooks Macdonald closed at £11.15 on Monday, down 15p.

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  • Brooks Macdonald Group PLC (BRK.L)
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  • Carillion PLC (CLLN.L)
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  • Ocado Group PLC (OCDO.L)
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  • Centrica PLC (CNA.L)
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  • Northbridge Industrial Services PLC (NBI.L)
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