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The Expert View: Cookson Group, EnQuest and Tate & Lyle
Our daily round-up of analyst recommendations and commentary, featuring YouGov and Carillion.
by Harry Brooks on Apr 03, 2012 at 05:01
We’ve rounded up some of the best comment from analysts to give you their views on Cookson Group, EnQuest, Tate & Lyle, YouGov and Carillion.
Investec backs possible Cookson Group demerger
Michael Blogg, analyst at Investec Securities, has said that if a long-speculated break-up of materials technology firm Cookson Group (CKSN.L) goes ahead it could add more than 25% to the value of the group.
The company is reportedly considering spinning off its electronics division, which among other things makes parts for Apple's iPad, and has appointed Rothschild to put together the proposal, according to the Sunday Times.
Blogg said that a break-up would allow the division to be rated against the electronic and electrical equipment sector, potentially adding more than 25% to the group's value. RBC analyst Andrew Carter noted the possibility of a break-up back in February, saying 'We believe there is a case for a break-up and view a demerger as more viable than an outright sale.'
Over at Oriel, analyst Harry Philips upped his target price for the company from 850p to 900p, and he added 'We understand that 18% shareholder Cevian is an endorser of the existing strategy and we are not aware of any new particular groundswell of shareholder opinion that was pushing for an immediate move so a good proactive move by the company.'
Shares in the group closed at 729.57p on Monday, up 38.57p or 5.58%.
Liberum backs EnQuest on growth potential
Andrew Whittock, analyst at Liberum Capital, has increased his target price for UK Continental Shelf oil explorer EnQuest (ENQ.L) as he believes the current share price 'does not reflect asset value, let alone growth'.
Last week's full-year results were widely praised by analysts. Over the year oil output rose 12.5% on 2010, and revenues soared 52.3% to $936 million.
Despite pre-tax profits rising to $363 million from $55.8 million, the group isn't paying any dividends as the management are keen to re-invest to increase production. On these plans, Whittock said 'We expect costs to increase as new fields are developed but believe the low risk, acquisition-led strategy will add value.
'Today’s assets plus selective acquisitions should provide a platform for sustainable growth. We believe that, as delivery continues, confidence in growth will build and be reflected in the share price,' he added. Whittock's target price is now 177p, up from 169p.
Shares in the group closed at 130.40p on Monday, up 4.30p or 3.41%.
Berenberg Bank raises Tate & Lyle EPS forecasts
James Targett, analyst at Berenberg Bank, has increased his 2012 earnings per shares (EPS) estimate for food processing company Tate & Lyle (TATE.L) following a positive fourth-quarter interim management statement.
Following the statement, which indicated that results will be in line with expectations, Targett has increased his EPS forecasts for 2012 and 2013 by 1% and 2% respectively. The analyst recently had breakfast with the company's chief executive officer (lashings of sugar on their Wheetabix, presumably), and he said that this meeting confirmed his view that the firm is well placed in the speciality ingredients industry.
Targett is sticking with his 'hold' recommendation on the shares for now, having downgraded them in January. Nonetheless, he sounded optimistic about a rerating soon: 'The transformation to a higher growth, less volatile specialty ingredient company is well under way, with the aim of reducing the relatively volatile bulk division to about 10% of profits (vs. 45% currently); this should drive a re-rating.'
Shares in the group closed at 707.50p on Monday, up 2.50p or 0.35%.
Peel Hunt puts YouGov under review amid profit-margin squeeze
Patrick Yau, analyst at Peel Hunt, has put his recommendation for internet-based market research firm YouGov (YOU.L) under review on the back of falling profits margins and a run on the shares over the past three months.
Although the company's first-half results indicated solid trading in the UK and the US, with organic revenues up 12% to £29.9 million, earnings were hit by the loss of a high-margin contract in the Middle East. This, plus higher investment in the business, has seen margins across the group fall from 8% to 6.8%.
'The shares have risen around 53% since the start of the year and are currently close to our previous price target of 71p,' Yau noted. 'We therefore place our recommendation under review ahead of confirmation of 2012 numbers.'
Shares in the group closed at 67.38p on Monday, down 0.38p or 0.55%.
More updates from Peel Hunt:
- 888 Holdings (888.L), 'buy' (unchanged), target price: 75p (was 63p)
- Moss Bros (MOSB.L), 'buy' (unchanged), target price: 60p (was 50p)
- Vectura (VEC.L), 'buy' (unchanged), target price: 130p (was 124p)
Oriel lifts target price for Carillion
Mark Howson, analyst at Oriel Securities, has increased his target price for Wolverhampton-headquartered construction services firm Carillion (CLLN.L) based on his earnings forecast for the year ahead.
Following the presentation of the group's 2011 results Howson lifted his target price from 392p to 411p. 'We have revised up our target price... principally as we have shifted the earnings based used from that of 2011 to a 2012 basis,' he said.
The analyst said that he sees considerable potential for growth in the year ahead: 'We still believe that the group has sizeable growth opportunities ahead of it as we work through 2012. We believe that there remain substantial opportunities in outsourcing in 2013 at the UK MoD in particular and at the Local Authority level too, and sizeable opportunities to grow organically in the Middle East and Canada.'
Shares in the group closed at 298.90p on Monday, up 0.50p or 0.17%.
More updates from Oriel Securities:
- FirstGroup (FGP.L), 'hold' (was 'buy')
More about this:
Look up the shares
- Carillion PLC (CLLN.L)
- YouGov PLC (YOU.L)
- Cookson Group PLC (CKSN.L)
- Tate & Lyle PLC (TATE.L)
- EnQuest PLC (ENQ.L)