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The Expert View: FirstGroup, Card Factory and Auto Trader

Our daily roundup of analyst commentary on shares, also including Johnson Matthey and Go-Ahead.

by Daniel Grote on Jun 01, 2018 at 05:00

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Key stats
Market capitalisation£55m
No. of shares out106m
No. of shares floating47m
No. of common shareholdersnot stated
No. of employees47
Trading volume (10 day avg.)m
Turnover£24m
Profit before tax£12m
Earnings per share6.61p
Cashflow per share8.89p
Cash per share13.75p

‘Value remains’ in stricken FirstGroup

Liberum is convinced that ‘value remains’ in FirstGroup’s (FGP) shares, but ‘realising it remains a challenge’ after full-year results revealed a 4.8% fall in profits and the departure of boss Tim O’Toole.

Shares in FirstGroup slumped 17.3% to 91.6p on the news. Analyst Gerald Khoo maintained his ‘buy’ rating and 125p target price.

‘The chief executive’s departure should be viewed as an opportunity to pursue a different approach, although there is a lack of clarity as to what that might be at this stage,’ said Khoo.

Khoo said £106 provision against future losses from the TransPennine franchise was ‘a surprise, although there had been concerns about the outlook’.

‘The failure to restore the dividend is disappointing, but not surprising given the TransPennine provision and the ongoing pressures on current trading in some divisions,’ he added.

Key stats
Market capitalisation£677m
No. of shares out342m
No. of shares floating304m
No. of common shareholdersnot stated
No. of employees9936
Trading volume (10 day avg.)1m
Turnover£422m
Profit before tax£94m
Earnings per share17.08p
Cashflow per share20.19p
Cash per share1.05p

Card Factory disappoints Peel Hunt

Peel Hunt has cut its target price on Card Factory (CARDC) after a ‘disappointing’ update from the retailer.

Analyst Jonathan Prichard cut his target price from 240p to 200p and maintained his ‘hold’ rating. The shares fell 9.2% to 198.3p yesterday.

‘The first quarter trading update is disappointing, with like-for-likes in negative territory, and we are downgrading to slightly below management guidance,’ he said.

‘Card volumes remain a concern: Valentine’s and Mother’s Day went well but everyday cards are lacking inspiration.

Cash generation does remain an attraction but the top line of the cashflow keeps falling and that’s going to hold the shares back.’

Key stats
Market capitalisation£728m
No. of shares out43m
No. of shares floating39m
No. of common shareholdersnot stated
No. of employees29000
Trading volume (10 day avg.)m
Turnover£3,481m
Profit before tax£218m
Earnings per share207.09p
Cashflow per share418.37p
Cash per share1,370.12p

Jefferies sees ‘upside either way’ for Go-Ahead

Jefferies has upped his target price on Go-Ahead (GOG), arguing there was ‘upside either way’ for the shares ahead of the awarding of the Southeastern rail contract in the autumn.

Analyst Joe Spooner said his analysis pointed to a valuation of more than £23 a share for the bus and rail operator should it win the contract. If the franchise goes to a competitor, Spooner still believes the shares would be worth more than £20, if the bus franchise is valued consistently with that of rival National Express.

Shares in Go-Ahead fell 2.7% to £16.94 yesterday. Spooner, who rates the shares a ‘buy’, raised his target price from £21 to £22, incorporating a 55% probability of a Southeastern contract win.

Key stats
Market capitalisation£3,343m
No. of shares out948m
No. of shares floating918m
No. of common shareholdersnot stated
No. of employees824
Trading volume (10 day avg.)4m
Turnover£311m
Profit before tax£212m
Earnings per share15.60p
Cashflow per share16.40p
Cash per share0.82p

Shore Capital to review Auto Trader stance

Shore Capital is preparing to review its stance on Auto Trader (AUOTA) when the car classified website reports annual results next week.

‘These results will provide a good opportunity to assess whether a period of weakness in new car registrations has had an impact on demand for its services in the used sector and in particular, its ability to upsell dealers to higher cost products,’ said Roddy Davidson, analyst at Shore Capital.

Davidson said the results should also provide a gauge of ‘the company’s view on prospects for the used car market over the remainder of the current year, the pace of dealer consolidation and whether there have been any significant changes in the availability and affordability of car finance.’

Davidson rates the shares, but will review that stance next week, given the recent weakness in the shares.

He said he was positive on the company’s ‘strategy, track record, brand strength, unrivalled reach and the quality and value-add of its dealer and consumer offerings’ but ‘have for some time viewed its valuation as a fair reflection of these prospects’.

Key stats
Market capitalisation£6,795m
No. of shares out194m
No. of shares floating189m
No. of common shareholdersnot stated
No. of employees12214
Trading volume (10 day avg.)1m
Turnover£12,031m
Profit before tax£665m
Earnings per share200.83p
Cashflow per share289.49p
Cash per share174.60p

Johnson Matthey caught in catch-22

Hargreaves Lansdown believes catalytic converter maker Johnson Matthey (JMAT) is caught in a catch-22 amid the move to cut vehicle emissions.

‘On the one hand it’s benefitting from the campaign to reduce vehicle emissions, which demands that ever more sophisticated catalytic converters are strapped to car exhausts, and gasoline sales more than offsetting weakness in diesel following the Volkswagen scandal,’ said equity analyst Nicholas Hyett.

‘But the shift to electric cars, the campaign’s logical conclusion, would render JMAT’s core product obsolete – since electric cars don’t have an exhaust at all.

‘Fortunately a switch to electric vehicles isn’t going to happen overnight – with the necessary infrastructure costing billions and taking years to install. That’s given JMAT the time to pivot to batteries.’

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  • First Property Group PLC (FSTP.L)
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  • Card Factory PLC (CARDC.L)
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  • Auto Trader Group PLC (AUTOA.L)
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  • Go-Ahead Group PLC (GOG.L)
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  • Johnson Matthey PLC (JMAT.L)
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