Citywire for Financial Professionals
Share this page:
Stay connected:

 

Citywire printed articles sponsored by:


View the rest of this gallery online at http://citywire.co.uk/money/gallery/a1049051

The Expert View: Diageo, EasyJet and Dunelm

Our daily roundup of analyst commentary on shares, also including Just Group and Hammerson.

by Michelle McGagh on Sep 14, 2017 at 05:00

If you would like to receive news alerts on any of the stock mentioned in The Expert View, click on the star icons below to add them to your favourites.
Key stats
Market capitalisation£64,494m
No. of shares out2,519m
No. of shares floating2,503m
No. of common shareholdersnot stated
No. of employees30051
Trading volume (10 day avg.)3m
Turnover£12,050m
Profit before tax£2,717m
Earnings per share107.69p
Cashflow per share126.36p
Cash per share50.52p

Berenberg downgrades Diageo as Americans cut back on booze

Berenberg has downgraded beverage company Diageo (DGE) on the back of long-term predictions on the reduced consumption of alcohol.

Analyst Javier Gonzalez Lastra downgraded his recommendation from ‘buy’ to ‘hold’ with a target price of £25.50 on the shares, which fell 19p to £25.60 yesterday.

He said over the past decade, US alcohol consumption had increased – despite decreases in western European markets – but this was forecast to reverse in the next 10 years due to older millennials becoming more health conscious, a maturing of female consumption, and a change in the ethnic mix.

‘The data suggest Americans will drink less, but more premium. Beer, spirits, and wine producers need to adapt, with “tail brands” increasingly becoming a drag on financial performance,’ he said.

‘We calculate Diageo, which we downgrade to “hold”, has the largest tail of brands – 17% of sales.’

Key stats
Market capitalisation£4,828m
No. of shares out397m
No. of shares floating260m
No. of common shareholdersnot stated
No. of employees10273
Trading volume (10 day avg.)3m
Turnover£4,669m
Profit before tax£427m
Earnings per share107.56p
Cashflow per share150.13p
Cash per share243.95p

Liberum: risks and little revenue from EasyJet’s new connection service

Liberum remains unconvinced about the impact EasyJet’s (EZJ) new airlines connections initiative will have.

Analyst Gerald Khoo retained his ‘sell’ recommendation and target price of £11.00 on the airline after the announcement that EasyJet was launching ‘worldwide by EasyJet’ that will allow passengers to book connecting flights that combine EasyJet flights with those of other airlines. The service will initially operate from Gatwick, the airline’s biggest base.

‘Management sees scope to add other airlines and to replicate the model at other major bases,’ said Khoo. ‘In our view, this offers incremental revenue, although we would be cautious on the upside in the short term.’

He said the key cost risk was from flight delays and ‘compensation liability’.

‘We understand the agreement with the partner airlines have the principle that each airline is responsible for delay on its own flights, with the Gatwick connect service offering rebooking on the next available flight in the case of a missed connection. However, we are sceptical that EasyJet can avoid costs where a delay on its flight causes a missed long haul connect, resulting in an overnight – or worse – delay.’

The shares edged 8p higher to £12.02 yesterday.

Key stats
Market capitalisation£1,351m
No. of shares out202m
No. of shares floating96m
No. of common shareholdersnot stated
No. of employees5675
Trading volume (10 day avg.)m
Turnover£881m
Profit before tax£102m
Earnings per share50.33p
Cashflow per share62.78p
Cash per share7.38p

Clarity on new boss will lift Dunelm shares, says Peel Hunt

Clarity on leadership would provide a platform for Dunelm (DNLM) shares following chief executive John Browett’s shock departure last month, says Peel Hunt.

Analyst John Stevenson retained his ‘hold’ recommendation and target price of 620p on the stock after final results showed profit before tax fell 15% year-on-year as expected. The drop was a function of expected Worldstore losses.

The shares jumped 5% to 645.3p yesterday.

‘There’s not much in the way of new information [in the results], no bad thing given the recent departure of the chief executive,’ said Stevenson.

‘Trading on c.13x price/earnings ratio, clarity on leadership would provide a platform for the shares to build from.’

He added that trading was ‘positive’ and ‘the outlook for the shares and the business should be much clearer from here’.

Key stats
Market capitalisation£1,501m
No. of shares out934m
No. of shares floating895m
No. of common shareholdersnot stated
No. of employees1190
Trading volume (10 day avg.)2m
Turnover£-100,000m
Profit before tax£-100,000m
Earnings per share-9,999,999.00p
Cashflow per share-9,999,999.00p
Cash per share7.65p

Quality Just Group shares deserve to rally further, says Shore Capital

Retirement solutions company Just Group (JUSTJ), formerly JRP, has seen its shares rally but Shore Capital says they still have some way to go considering the quality of the business.

Analyst Eamonn Flanagan retained his ‘buy’ recommendation on the stock, which edged 0.4% higher to 161.7p yesterday.

Interim results from the group, which was formed of the merger of Just Retirement and Partnership, were ‘excellent’ and show it is ‘delivering against targets, that its new business prospects remain excellent and that its capital position is robust’, said Flanagan.

‘A recent rally in the stock price has brought it closer to its IFRS net asset value excluding dividend but still a long way from a sensible rating for a company of this quality and positioning in the market,’ he said.

Key stats
Market capitalisation£4,337m
No. of shares out793m
No. of shares floating751m
No. of common shareholdersnot stated
No. of employees565
Trading volume (10 day avg.)3m
Turnover£251m
Profit before tax£317m
Earnings per share40.13p
Cashflow per share40.84p
Cash per share9.37p

Hammerson debt restructure ‘makes sense’, says Numis

Real estate investment trust (Reit) Hammerson (HMSO) is undertaking some capital structure housekeeping that could have a beneficial impact on earnings, says Numis.

Analyst Robert Duncan retained his ‘reduce’ recommendation and target price of 518p on the stock after Hammerson said it was taking steps to improve the efficiency of its debt with early redemption of a £250 million 2020 bond bearing a 6.8% coupon. The bond will be redeemed in October, hitting the net asset value by £40 million.

‘The more important reason for the transaction from Hammerson’s point of view is the positive impact on earnings; assuming the bond is redeemed with debt with a marginal cost of c.2.5%, we estimate an annualised interest saving of c.£10 million… which would boost our existing full-year 2018 earnings per share estimate by c.4% to 33.9p,’ he said.

Duncan added there was ‘limited scope for organic income growth across the retail sector’ so ‘extracting gains through refinancing makes sense’.

The shares fell 1.1% to 545.5p yesterday.

More about this:

Look up the shares

  • Diageo PLC (DGE.L)
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them
  • easyJet plc (EZJ.L)
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them
  • Dunelm Group PLC (DNLM.L)
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them
  • Just Group PLC (JUSTJ.L)
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them
  • Hammerson PLC (HMSO.L)
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them

Archive

More galleries

 See all

leave a comment

Please sign in here or register here to comment. It is free to register and only takes a minute or two.

Sorry, this link is not
quite ready yet