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The Expert View: Glaxo, Bovis and Moneysupermarket
Our daily roundup of analyst commentary on shares, also including Experian and Renishaw.
by Sam Antrobus on Jan 18, 2016 at 05:00
Glaxo break-up talk could be premature
Although talk of a break-up may be gathering pace, pharmaceutical giant GlaxoSmithKline (GSK) is unlikely to segment anytime soon, according to Liberum.
Analyst Naresh Chouhan, retained his ‘hold’ recommendation, with a target price of £13.50 on the shares, which fell 1.7% to £13.58 on Friday.
‘There has been much talk of a GSK break-up in recent months following a lacklustre strategy day in November, which gave little hope for a bright future for the company. Using our sum-of-the-parts valuation for GSK, we show that a break-up per se, doesn’t create any value for investors,’ he says.
‘Whilst theoretically we see the potential for upside from a break-up, there are a number of practical concerns that make a full break-up difficult to execute and would likely prevent it from happening.
‘While our sum-of-the-parts valuation is only £12.50, we value GSK on a 6% dividend yield which we believe provides downside support to the shares.’
Jefferies keen on Bovis’ ‘compelling investment case’
Jeffries remains positive on Bovis Homes (BVS) following a good end to 2015, with the house builder ‘back on the front foot’ as it enters the year ahead.
Analyst Anthony Codling retained his ‘buy’ recommendation with a target price of 922p on the shares, which dipped 0.9% to 913.5p on Friday.
‘On valuation grounds, Bovis presents the most compelling investment case in the sector and we retain our “buy” rating,’ he said.
‘Bovis is one of the few growth stocks in the UK-listed housebuilding sector; we estimate that volumes will grow by c.25%, and profit before tax by around 65%, in the three years ending 2017.’
‘The group is focused on the higher growth housing markets in the south of the UK, with limited exposure to the more volatile London market. Valuation lags the sector by around 36% on a calendar year 2016 price-to-book basis, which, in our view, provides an attractive entry point for a stock supplying a market with a fundamental demand and supply imbalance.’
Experian results a ‘positive surprise’ for Shore Capital
Strong performance in the Americas have driven good results for data services specialist Experian (EXPN).
Shore Capital analyst Roddy Davidson offers a ‘hold’ recommendation, with a target price of £11.30 on the shares, which fell 6p to £11.26 on Friday.
Experian delivered underlying organic growth at group level of around 6%, exceeding Shore Capital’s estimate of 3%.‘The core credit division in North America saw organic growth of 11% driven by strong markets such as in healthcare,’ said Davidson.
‘In South America organic growth of 7% translated to reported -29% through [foreign exchange movements]. Credit here grew by 7% driven by contra cyclical demand to tackle delinquencies.
‘We expect a positive share price reaction accordingly – the longevity of business trends is now the question.’
Competition heats up for Moneysupermarket
Peel Hunt analyst Malcom Morgan attributes a surge in competition as one factor behind lower insurance sales by price-comparison website Moneysupermarket (MONY).
Morgan moved back to a ‘hold’ recommendation, with a target price of 350p on the shares, which fell 10.8% to 313.2p on Friday.
‘Insurance underperformed in Q4, falling 10% to give a 2% year-on-year rise. The company had guided to a fall in its Q3 statement as the competition from 2014 was tough, but a very active relaunch by GoCompare ratcheted up the competitive noise in the industry,’ he said.
‘While market attention will be on the weak insurance figure, it was offset by better Home service and Money channels, where collective switching continues apace.
‘We wait to see how the company responds to the rise in insurance competition when it reports in March.’
Innovation to fuel positive year for Renishaw?
Engineering company Renishaw (RSW) could be in a strong position to benefit from increased interest in metal 3D printing technology.
Numis analyst Nick James retained his ‘buy’ recommendation and target price of £28.20 on the shares, which fell 3.5% to £16.35 on Friday.
‘While forecasting Renishaw is always challenging, we continue to expect some resilience from its strong structural positioning (enabler of increased productivity and higher precision in manufacturing),’ he said.
‘Evidence of potential impact from Additive Manufacturing (metal 3D printing) is building and we are increasingly bullish that this could generate material incremental revenues, potentially in 2016.’
‘Ahead of the results, we maintain estimates with the stronger US dollar offsetting a slightly lower underlying revenue outlook.’
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Look up the shares
- Bovis Homes Group PLC (BVS.L)
- Renishaw PLC (RSW.L)
- GlaxoSmithKline PLC (GSK.L)
- Experian PLC (EXPN.L)
- Moneysupermarket.Com Group PLC (MONY.L)