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The Expert View: HSBC, Hargreaves Lansdown and Bovis
Our daily roundup of analyst commentary on shares, also including Associated British Foods and Card Factory.
by Michelle McGagh on Feb 23, 2016 at 05:00
Where was the profit warning from HSBC?
Analysts expressed surprise that HSBC (HSBA) failed to issue a profit warning ahead of final results as the numbers came in well below expectations.
Shore Capital analyst Gary Greenwood reiterated his ‘sell’ recommendation on the shares, which fell 0.9% to 445.6p yesterday.
‘HSBC’s final results have come in well below our own and consensus market expectations both on an adjusted and statutory basis,’ he said.
‘This is even more significant given that the group has already reported numbers for the first nine months and, with the group slipping into loss-making territory during Q4, we are somewhat surprised that management has not deemed it necessary to issue a profit warning ahead of the results.’
‘The shares have fallen sharply in recent months and are now trading in line with our last published fair value estimates of 450p, to which we see downside risk. We expect a negative market reaction to these results and reiterate our ‘sell’ stance accordingly,’ he said.
Hargreaves Lansdown: little upside to price target
The proposition offered by online stockbroker Hargreaves Lansdown (HRGV) continues to strengthen but there is little upside to the share price.
Jefferies analyst Phil Dobbin retained his ‘hold’ recommendation and increased the target price from £10.73 to £12.03. The shares rose 1.9% to £12.61 yesterday.
‘We have trimmed our forecasts to reflect the impact of volatility on stockbroking commission and increased costs to reflect spend on new initiatives becoming business-as-usual costs in the future,’ he said.
‘We feel that Hargreaves’ strong client and asset retention explains its high valuation. On a rolled-forward discounted cashflow, we derive a price target of £12.03, leaving virtually no upside form the current share price.’
Dobbin added that general risks to the price target ‘derive from market performance and volatility, net flows, platform pricing and regulation’.
Card Factory at a ‘very attractive’ entry point
Card Factory (CARDC) has a new chief executive, who takes over a business that is growing and a ‘compelling’ investment case.
Peel Hunt analyst Jonathan Pritchard retained his ‘buy’ recommendation and target price of 500p on the shares, which edged 1.7% higher to 346.7p yesterday.
‘The new chief executive joins Card Factory and inherits a growing business and compelling investment case,’ he said.
‘Karen Hubbard’s impressive CV suggests she will add plenty to the retail detail, but, from an overall strategic perspective, we trust she’ll keep the ship on its current course. There is always a degree of risk when senior executives change, but we believe that is more than reflected in the share price, which has been weak along with the sector.
‘A c.7% yield represents a very attractive entry point to us and there’s an outside chance of confirmation of further cash distributions at the prelims on 5 April.’
Bovis takes a guarded view on 2016
House builder Bovis Homes (BVS) has reported an increase in profits but management is cautious about 2016.
Liberum analyst Charlie Campbell retained his ‘hold’ recommendation and target price of £10.05 on the shares, which fell 4% to 874p yesterday.
‘Bovis’ results are in line with expectations, with profit before tax up 20% to £160 million,’ he said.
‘Management has given a positive, but guarded, outlook for 2016, warning that the year will be second half-weighted and that labour constraints may still prove challenging. The shares look cheap against the sector, on 1.2x book versus 2.0x, but this is warranted by the lack of margin progression in 2015 and relatively low return on equity. We continue to see better value elsewhere, especially Bellway.’
'Reduce' Associated British Foods on high rating
Associated British Foods (ABF), owner of Primark, may report slightly lower full year results but it still remains a strong company.
Numis analyst Charles Pick retained his ‘reduce’ recommendation and increased his target price from £27.06 to £28.00. The shares rose 1% to £32.89 yesterday.
‘The 14 January trading update provided considerable detail on the first 16 weeks to 2 January. [Yesterday’s] update for the H1 period to 27 January features slightly amended full year guidance on foreign exchange,’ he said.
‘H1 adjusted earnings before interest and tax is expected to see 'some progress' but with H1 adjusted earnings per share ‘slightly lower’.
‘Target price boosted to £28.00… the 'reduce' tag is purely on ratings criteria: this remains a strongly-managed concern with Primark set to enter Italy in April and to boost its US store numbers this current year from the present two to eight.’
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Look up the shares
- HSBC Holdings PLC (HSBA.L)
- Bovis Homes Group PLC (BVS.L)
- Hargreaves Lansdown PLC (HRGV.L)
- Associated British Foods PLC (ABF.L)
- Card Factory PLC (CARDC.L)