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The Expert View: Just Eat, Ashtead and Intertek

Our daily roundup of analyst commentary on shares, also including LSL Property Services and National Express.

by Michelle McGagh on Mar 07, 2018 at 05:00

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Key stats
Market capitalisation£5,171m
No. of shares out680m
No. of shares floating586m
No. of common shareholdersnot stated
No. of employees1621
Trading volume (10 day avg.)2m
Turnover£376m
Profit before tax£112m
Earnings per share10.55p
Cashflow per share14.08p
Cash per share19.25p

Numis puts Just Eat ‘under review’ on investment plans

Numis has placed Just Eat (JE) ‘under review’ as the online takeaway services gears up for further investment.

Analyst Richard Stuber placed his ‘add’ recommendation ‘under review’ alongside the target price after Just Eat announced it would spend an extra £50 million to battle competition from rivals such as Deliveroo and Uber Eats. The shares fell 11.9% to 751p yesterday on the news.

Investment will continue this year as management believes it is the way to capture greater market share and also as a defensive move against ‘fast-moving and well-capitalised competitors’.

‘Investment is expected to be materially accelerated, focusing on extending its delivery services in the UK and Canada,’ said Stuber.

‘As a consequence, full year 2018 earnings guidance of £165-185 million is 23% below consensus at the midpoint. Until we get comfortable with the economics of the delivery model, we move our recommendation to “under review”.’

Key stats
Market capitalisation£9,387m
No. of shares out495m
No. of shares floating483m
No. of common shareholdersnot stated
No. of employees15720
Trading volume (10 day avg.)2m
Turnover£3,187m
Profit before tax£1,631m
Earnings per share100.02p
Cashflow per share226.81p
Cash per share1.26p

Hargreaves: investors wobble on Ashtead currency woes

Equipment rental company Ashtead (AHT) has disappointed investors by failing to upgrade its full-year guidance despite ‘rapid growth’ in the third quarter, says Hargreaves Lansdown.

The company reported rental revenues up 24% to £845.5 million in the third quarter and operating profits up 23% to £233.3 million. But the shares were down 4.5% at £19.38 yesterday as managers cautioned over the weak dollar.

‘With over 80% of revenue generated in the US, Ashtead was a major beneficiary of the weak pound in the aftermath of the Brexit vote, said analyst Nicholas Hyett.

‘Now it’s the dollar looking wobbly, and that’s creating headwinds since Ashtead’s dollar profits are no longer worth as much in sterling terms.’

Hyett added that the last few years had shown currency movements were ‘unpredictable’ and in the long term it was operating performance that is important ‘and on that front Ashtead is looking increasingly sharp’.

Key stats
Market capitalisation£8,244m
No. of shares out161m
No. of shares floating160m
No. of common shareholdersnot stated
No. of employees42452
Trading volume (10 day avg.)m
Turnover£2,567m
Profit before tax£499m
Earnings per share156.83p
Cashflow per share230.69p
Cash per share108.81p

‘Sell’ Intertek despite results beat

Quality and safety services provider Intertek (ITRK) has increased its operating margin but Shore Capital warned that it was hard to discern between business improvement and exceptional charges.

Analyst Ben McSkelly retained his ‘sell’ recommendation on the stock after full-year results came in ‘broadly in line’ with revenues up 7.9% and operating margins increasing 1.1%. That sent the shares 4.9% higher to £51.04 yesterday.

‘These results outstrip our 2017 forecast for 0.5% of margin improvement,’ he said. ‘However, at the risk of repeating ourselves, we caution on the below the line charges. These charges include £8 million in IT impairment, £8.8 million personal protective equipment impairment related to a service line and £12.4 million of restructuring costs.’

He said that in a group of Intertek’s ‘size, global reach and range of products’ it is ‘necessary for management to reposition the group for the best opportunities, however, we struggle to differentiate ongoing business improvement from exceptional charges’.

Key stats
Market capitalisation£278m
No. of shares out103m
No. of shares floating90m
No. of common shareholdersnot stated
No. of employees4630
Trading volume (10 day avg.)m
Turnover£308m
Profit before tax£37m
Earnings per share48.98p
Cashflow per share58.08p
Cash per share0.00p

LSL defies a difficult property market, says Jefferies

The property sector is struggling but LSL Property Services (LSL) is ‘defying the market’ with increased profits and dividends, says Jefferies.

Analyst Anthony Codling retained his ‘hold’ recommendation and increased the target price from 220p to 260p.

The shares edged a penny higher to 273p yesterday after full-year results showed that while it was a tough year for LSL’s peers it ‘held its nerve in 2017 and delivered results ahead of expectations’.

‘LSL delivered profit before tax 10% ahead of our expectations and a 40% dividend payout ratio sends a strong message about how the board feel about the robustness of LSL’s strategy and business model, which appear to us as fit for purpose,’ said Codling.

‘Once again LSL has kept its powder dry and delivered more powder than the market was expecting.’

Key stats
Market capitalisation£1,985m
No. of shares out512m
No. of shares floating439m
No. of common shareholdersnot stated
No. of employees44977
Trading volume (10 day avg.)1m
Turnover£2,321m
Profit before tax£381m
Earnings per share22.94p
Cashflow per share58.14p
Cash per share61.42p

National Express is ‘inexpensive’, says Liberum

Coach group National Express (NEX) is inexpensive in ‘absolute terms’ and has a ‘sound strategy’, according to Liberum.

Analyst Gerald Khoo retained his ‘buy’ recommendation and increased the target price from 390p to 420p. The shares were up 3.1% at 390.2p yesterday.

‘A solid 2017 performance saw revenue and profit growth across the board,’ he said. ‘Our forecasts point to more of the same this year. This is in sharp contrast to the UK public transport peer group, more than justifying the premium rating.’

He added that the rating was ‘inexpensive’ in ‘absolute terms, combined with a sound strategy being executed well is still attractive’.

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  • Just Eat PLC (JE.L)
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  • Ashtead Group PLC (AHT.L)
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  • Intertek Group PLC (ITRK.L)
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  • LSL Property Services PLC (LSL.L)
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  • National Express Group PLC (NEX.L)
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