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The Expert View: DFS Furniture, Majestic Wine & SuperGroup

Our roundup of analyst commentary on shares, including Bunzl and Safestore.

by Michelle McGagh on Jun 16, 2017 at 05:01

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Key stats
Market capitalisation£424m
No. of shares out212m
No. of shares floating202m
No. of common shareholdersnot stated
No. of employees3923
Trading volume (10 day avg.)1m
Turnover£756m
Profit before tax£60m
Earnings per share28.16p
Cashflow per share36.85p
Cash per share33.00p

No cushion for failure at DFS, says Jefferies

Jefferies is sceptical that sofa retailer DFS Furniture (DFS) will be able to bounce back from a 20% share price fall after it lowered 2017 full-year expectations.

Caroline Gulliver retained her ‘buy’ recommendation and target price of 280p on the stock, which had dropped 20.6%, or 52p, to 200p.

Markets were spooked by DFS lowering full-year 2017 earnings to between £82 to £87 million, the mid-point of which is 11.5% below consensus after it said sofa sales had fallen by around 6% over the past four months.

‘A combination of the late Easter, warm May bank holiday and election uncertainty have weighed on sales,’ said Gulliver. ‘Management is cautiously confident full-year 2018 will see a recovery, but we think it is too soon to say given rising inflation.’

Longer term, Jefferies expects DFS to win market share.

Key stats
Market capitalisation£248m
No. of shares out71m
No. of shares floating47m
No. of common shareholdersnot stated
No. of employees1454
Trading volume (10 day avg.)m
Turnover£402m
Profit before tax£2m
Earnings per share3.34p
Cashflow per share19.05p
Cash per share10.97p

Majestic Wine loses its fizz after Shore Capital downgrade

Shore Capital has downgraded Majestic Wine (WINE) on concerns that consumers’ disposable income is being squeezed as economic uncertainty rises.

Analyst Phil Carroll downgraded his recommendation from ‘buy’ to ‘hold’ following full-year results that showed the company will be 'there or thereabouts' in terms of market expectations for adjusted profit before tax.

He said the year had been ‘a story of two halves’: a disappointing first half was followed by a ‘much improved’ second half.

‘The group is now past the halfway stage of its transformation process having invested over £8 million through the income statement to strengthen the business, rather than in capital spend on a store rollout programme,’ he said.

‘Majestic is now in a more robust position.’

The stores may be in a better position, however the economic outlook remains uncertain. This is creating an increasingly challenging consumer environment as disposable income comes under pressure, Carroll noted.

‘Given the strong performance in the stock and the more uncertain outlook, we believe the shares are now looking up with events at 385p. Therefore we downgrade our ‘buy’ recommendation to ‘hold’,’ said Carroll.

The shares slumped 9.7% to close 37.3p at 347.5p.

Key stats
Market capitalisation£7,965m
No. of shares out336m
No. of shares floating327m
No. of common shareholdersnot stated
No. of employees16285
Trading volume (10 day avg.)1m
Turnover£7,429m
Profit before tax£266m
Earnings per share79.68p
Cashflow per share113.97p
Cash per share84.15p

Barclays positive on bullet-proof Bunzl

Barclays is predicting upside at outsourcing group Bunzl (BNZL) for the next two years as its ‘inherent defensiveness’ allows it to weather an economic storm.

Analyst Paul Checketts reiterated his ‘overweight’ position and increased the stock's target price from £25.50 to £26.00. The shares shed 8p on Thursday to £23.84.

‘We believe Bunzl’s inherent defensiveness and confirmed new contract wins will support growth in the US and UK, where the outlook it more uncertain, while it is well positioned to benefit from improving trends in Europe,’ he said.

Checketts increased his earnings per share forecasts 2% this year and 3% next year on the back of recent acquisitions and ‘favourable currency moves’.

‘We see £30.00 as an upside scenario over a two-year period,’ he added.

Key stats
Market capitalisation£1,236m
No. of shares out81m
No. of shares floating51m
No. of common shareholdersnot stated
No. of employees2787
Trading volume (10 day avg.)m
Turnover£598m
Profit before tax£41m
Earnings per share50.63p
Cashflow per share89.82p
Cash per share123.96p

SuperGroup offers value, says Peel Hunt

Clothing brand SuperGroup (SGP) is ‘fundamentally undervalued’, according to Peel Hunt.

Analyst John Stevenson reiterated his ‘buy’ recommendation and target price of £19.00 on the stock, with the company expected to announce earnings growth of 20% for 2017. The shares fell 2.2%, or 34.5p, to £15.30.

‘Results for 2017 are not an anomaly; management has successfully delivered a five-year double-digit sales and profit before tax compound annual growth rate,’ he said.

This will continue thanks to a global roll-out of stores and online, with space to grow in Europe. He suspects as a special dividend is ‘increasingly likely’.

‘SuperGroup sits towards the top end of our small sub-set of structural growth retailers when it comes to revenue and profit growth expectations,’ said Stevenson.

‘With a strong management team, stable growth platform and consistent delivery of earnings expectations, SuperGroup looks undervalued on a short and medium term view. Buy ahead of the result,’ Stevenson said.

Key stats
Market capitalisation£894m
No. of shares out209m
No. of shares floating204m
No. of common shareholdersnot stated
No. of employees545
Trading volume (10 day avg.)1m
Turnover£115m
Profit before tax£87m
Earnings per share41.68p
Cashflow per share41.87p
Cash per share2.59p

Liberum: room for growth at Safestore

Liberum believes there is further upside for Safestore (SAFE) after first half results from the storage group.

Analyst Kieran Lee retained his ‘buy’ recommendation and target price of 475p on the stock after first-half earnings were 6% ahead of expectations.

He said the group continues to deliver gains in both occupancy and pricing, with the former boosted by the acquisition of Space Maker and the latter by currency translation.

The shares retreated 20.7p, or 4.6%, to 433.6p yesterday.

‘With 1.7 million square feet of unlet space, self-help potential in the acquired Space Maker portfolio and continued trading strength, we believe there remains further material upside potential,’ said Lee.

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  • DFS Furniture PLC (DFSD.L)
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  • Majestic Wine PLC (WINEW.L)
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  • Bunzl plc (BNZL.L)
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  • SuperGroup PLC (SGP.L)
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  • Safestore Holdings PLC (SAFE.L)
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