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The Expert View: Hiscox, Asos and Hikma

Our daily roundup of analyst commentary on shares, also including DMGT and Assura.

by Michelle McGagh on Oct 03, 2017 at 05:00

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Key stats
Market capitalisation£3,720m
No. of shares out286m
No. of shares floating272m
No. of common shareholdersnot stated
No. of employees2300
Trading volume (10 day avg.)1m
Turnover£1,788m
Profit before tax£337m
Earnings per share115.97p
Cashflow per share123.48p
Cash per share232.69p

Peel Hunt: hurricanes hit Hiscox harder than expected

Insurer Hiscox (HSX) has provided more details on the losses from hurricanes Harvey and Irma, leading Peel Hunt to predict the company will break even this year.

Analyst Andreas van Embden retained his ‘reduce’ recommendation and target price of 910p on the shares after an update that showed hurricane losses estimated to reach $225 million (£170 million), above the analyst’s $200 million forecast. The shares rose 1.3% to £12.97 yesterday.

‘These events are already having an impact on US property catastrophe rates according to Hiscox, supporting our view that US property catastrophe reinsurance will see rate increases in 2018,’ he said.

‘What is clear is that Hiscox will be materially affects by the hurricane season – we estimate a break-even result in 2017 excluding foreign exchange – the company is less defensive than might seem and trades at a material premium to underlying returns.’

Key stats
Market capitalisation£4,957m
No. of shares out83m
No. of shares floating53m
No. of common shareholdersnot stated
No. of employees2381
Trading volume (10 day avg.)m
Turnover£1,445m
Profit before tax£35m
Earnings per share41.71p
Cashflow per share79.81p
Cash per share207.72p

Deutsche Bank: little upside at Asos

Deutsche Bank is estimating a ‘solid out-turn’ from online fashion retailer Asos’ (ASOS) full-year results but believes there is little upside for the shares.

Analyst Charlie Muir-Sands retained his ‘hold’ recommendation and target price of £60.00 on the shares, which fell 24p to £59.31 yesterday.

‘Asos has only reported sales for the first 10 months of full-year 2017 so we think there will be some residual interest in trading over period four. We forecast group sales slowing slightly to 25% from the 26% achieved in period three,’ he said.

‘Through 2017 management has consistently reiterated a range of profit before tax of £78 million to £80 million despite revenue upgrades, as Asos has continued to plough leverage back into driving growth. We forecast £79.5 million full-year profit before tax but would not get excited about any modest beat.’

Muir-Sands added that there was ‘limited upside’ for the shares and rival Boohoo remains his e-commerce ‘top pick’.

Key stats
Market capitalisation£2,882m
No. of shares out241m
No. of shares floating132m
No. of common shareholdersnot stated
No. of employees8339
Trading volume (10 day avg.)1m
Turnover1,456m USD
Profit before tax116m USD
Earnings per share0.49 USD
Cashflow per share0.86 USD
Cash per share0.48 USD

Hikma in a strong position, says Jefferies

A visit to Hikma Pharmaceuticals’ (HIK) facility in Ohio has led Jefferies to a more positive outlook on its injectables positioning where it sees a more favourable pricing environment.

Analyst James Vane-Tempest retained his ‘hold’ recommendation and target price of £10.45 on the shares, which fell 1.2% to £11.97 yesterday.

He said following the visit ‘we are more positive on US injectables positioning and oral Gx [respiratory product], and were impressed with the [Ohio] site, which we believe has the potential to benchmark industry quality’.

The Ohio site was described as ‘impressive’ by Vane-Tempest, who said it was ‘one of the most remarkable we have seen’ thanks to its virtual warehousing, efficiency and storing and cataloguing.

Vane-Tempest added that he expected to see ‘a more favourable pricing environment in injectables versus orals’, helped also by the high barrier to entry.

Key stats
Market capitalisation£2,368m
No. of shares out373m
No. of shares floating262m
No. of common shareholdersnot stated
No. of employees10205
Trading volume (10 day avg.)1m
Turnover£1,753m
Profit before tax£141m
Earnings per share36.53p
Cashflow per share68.56p
Cash per share23.72p

DMGT shares offer ‘stand out’ value, says Numis

Shares in DMGT (DMGOa), owner of the Daily Mail, have been under pressure in the past year but Numis believes the shares offer ‘stand out value’ at their current level.

Analyst Gareth Davies retained his ‘buy’ recommendation and target price of 970p on the stock after a pre-close update for the year to 30 September that showed underlying revenues grew by 1%, a small improvement on the nine month results. The shares fell 1.5% to 639p yesterday.

‘Divisional outlook for the year remains unchanged. Management note an expectation that adjusted earnings per share will be towards the high end of the range with adjusted profit before tax towards the low end of market expectations,’ said Davies.

‘DMGT shares have been under considerable pressure over the past 12 months. The shares remain stand out value at current levels.’

Key stats
Market capitalisation£644m
No. of shares out1,007m
No. of shares floating907m
No. of common shareholdersnot stated
No. of employees30
Trading volume (10 day avg.)1m
Turnover£40m
Profit before tax£24m
Earnings per share4.43p
Cashflow per share4.43p
Cash per share5.18p

Gradual improvement at Assura, says Liberum

Healthcare real estate investment trust (Reit) Assura (AGRP) is ‘well placed’ for gradual improvement in rents but the scope will be limited by interest rate risk, says Liberum.

Analyst David Brockton retained his ‘buy’ recommendation and target price of 68p on the stock after a pre-close trading update showed ‘steady improvement in rental growth comfortably on track for [the] full-year forecast’. The shares rose 2.1% to 64p yesterday.

‘We continue to believe Assura remains well placed for some further gradual improvement in rental growth, as short-term inflationary pressure prompts increase for 28% of the group’s leases inked to the retail price index and some resurgence in new development approvals provides evidence of current land and build costs which can be used to price open market rent reviews,’ he said.

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Look up the shares

  • Hiscox Ltd (HSX.L)
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  • ASOS PLC (ASOS.L)
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  • Hikma Pharmaceuticals PLC (HIK.L)
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  • Daily Mail and General Trust P L C (DMGOa.L)
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  • Assura PLC (AGRP.L)
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