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The Expert View: Crest Nicholson, Burberry and National Express

Our daily roundup of analyst commentary on shares, also including Cineworld and Brewin Dolphin.

by Michelle McGagh on May 17, 2018 at 05:00

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Key stats
Market capitalisation£1,119m
No. of shares out257m
No. of shares floating244m
No. of common shareholdersnot stated
No. of employees905
Trading volume (10 day avg.)1m
Profit before tax£213m
Earnings per share65.08p
Cashflow per share65.66p
Cash per share69.87p

Crest Nicholson: right place, wrong price, says Jefferies

Housebuilder Crest Nicholson (CRST) is too focused on volumes rather than margins, leading Jefferies to downgrade its estimates.

Analyst Anthony Codling retained his ‘buy’ recommendation but reduced the target price from 720p to 638p. The shares fell 12.8% to 430.6p yesterday.

Codling said he had ‘followed guidance that selling prices will peak in 2018 and then reduce by 2% per annum’ and believes operating margins ‘will be at the low end of the target range – around 18% rather than 20%’. Dividend expectations were also cut but ‘even after the cut, the yield is an attractive 8%’.

‘Crest is not alone in finding growth difficult to execute and we are downgrading our estimates following their trading update,’ he said.

‘It seems to us that they are more focused on volumes than optimising margins. Unfortunately, due to a shift in market conditions, while their product may well be in the right place, it is not being pitched at the right price.’

Key stats
Market capitalisation£7,858m
No. of shares out418m
No. of shares floating412m
No. of common shareholdersnot stated
No. of employees9828
Trading volume (10 day avg.)2m
Profit before tax£637m
Earnings per share64.86p
Cashflow per share99.32p
Cash per share189.48p

Burberry’s premium push gets thumbs-up from Hargreaves

Burberry (BRBY) is ‘doing the right thing’ by pushing into the higher luxury brand range, according to Hargreaves Lansdown fund manager Steve Clayton.

The designer brand reported full-year sales in line at £2.7 billion but profits of £471 million came in 3% ahead of market expectations. The group also announced a £150 million share buyback.

Clayton, manager of the HL Select UK Growth Shares fund, which has a 3.8% position in the stock, said ‘these numbers will reassure investors’.

‘Market confidence in the Burberry story was knocked last November by Marco Gobbetti’s decision to invest time, effort, and profits into the move to push Burberry ever more upmarket,’ he said.

‘Top shareholder GBL sold out last week, knocking the price when potential buyers opted to wait for these results. We think Burberry is doing the right thing, because top luxury brands are fabulous assets that generate cash reliably, year after year.’

The shares rose 3.6% to £18.68 yesterday.

Key stats
Market capitalisation£2,127m
No. of shares out512m
No. of shares floating440m
No. of common shareholdersnot stated
No. of employees46264
Trading volume (10 day avg.)1m
Profit before tax£381m
Earnings per share22.89p
Cashflow per share58.14p
Cash per share61.42p

National Express valuation is ‘undemanding’, says Liberum

National Express’ (NEX) valuation is ‘undemanding’ but shares in the train and bus operator are up with events, says Liberum.

Analyst Gerald Khoo retained his ‘hold’ recommendation and target price of 410p on the stock after an update on the first four months of the year.

That showed revenue growth remaining strong, as well as ‘double-digit profit before tax growth, albeit against a slightly soft comparative’, he said.

The shares rose 1.9% to 414p yesterday.

‘We raise our forecasts slightly to reflect exchange rate movements helping North America translation and a delayed margin impact from long distance concession renewals in Spain,’ he said.

‘National Express trades on a 2018 price/earnings of 12.7 times. Although undemanding, these multiples represent a substantial premium rating relative to the peer group. Despite attractive fundamentals, we see the valuation as up with events.’

Key stats
Market capitalisation£3,636m
No. of shares out1,370m
No. of shares floating976m
No. of common shareholdersnot stated
No. of employees10232
Trading volume (10 day avg.)3m
Profit before tax£202m
Earnings per share16.31p
Cashflow per share27.35p
Cash per share10.90p

Cineworld strength to continue this year, says Numis

A strong film slate has seen Cineworld (CINE) grow its revenue above consensus and the rest of the year looks to be another blockbuster, says Numis.

Analyst Richard Stuber reiterated his ‘buy’ recommendation and target price of 328p on the stock, after it reported 6.7% revenue growth in the year to 13 May, ahead of Numis’ 4% forecasts.

This was ‘supported by a strong film slate year-to-date, including Black Panther and Avengers, both in the all-time top 10 box office films in the US’.

‘The film slate for the rest of the half looks very encouraging, with releases including Solo, Deadpool 2, and Jurassic World,’ he said. ‘In addition, the second half is shaping up well.’

The shares fell 2.1% to 266.4p yesterday.

Key stats
Market capitalisation£1,092m
No. of shares out283m
No. of shares floating249m
No. of common shareholdersnot stated
No. of employees1614
Trading volume (10 day avg.)m
Profit before tax£76m
Earnings per share15.96p
Cashflow per share20.82p
Cash per share60.01p

Peel Hunt: momentum at discounted Brewin Dolphin

Wealth manager Brewin Dolphin (BRW) is trading at a discount as it continues to improve levels of organic growth, says Peel Hunt.

Analyst Stuart Duncan retained his ‘buy’ recommendation and increased the target price from 390p to 435p.

He said interim results ‘confirmed that key trends remained unchanged’ with ‘good levels of assets under management growth, consistent margins, and the delivery of operational leverage/rising margins’.

‘Brewin continues to progress with the strategy followed over the last few years – with clear results from the enhanced focus on delivering improving levels of organic growth,’ he added.

‘The valuation multiple now stands at 14.3 times, which remains at a discount to others in the sector.’

The shares edged a penny higher to 382p yesterday.

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  • Brewin Dolphin Holdings PLC (BRW.L)
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  • Burberry Group PLC (BRBY.L)
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  • Cineworld Group PLC (CINE.L)
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  • Crest Nicholson Holdings PLC (CRST.L)
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  • National Express Group PLC (NEX.L)
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