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The Expert View: Just Eat, GlaxoSmithKline and Ashtead

Our daily roundup of analyst commentary on shares, also including G4S and IG group.

by Michelle McGagh on Jun 01, 2017 at 05:01

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Key stats
Market capitalisation£4,554m
No. of shares out679m
No. of shares floating571m
No. of common shareholdersnot stated
No. of employees1621
Trading volume (10 day avg.)6m
Turnover£376m
Profit before tax£72m
Earnings per share10.55p
Cashflow per share14.08p
Cash per share19.25p

Just Eat discount is too deep, says Peel Hunt

Peel Hunt has initiated coverage of takeaway delivery service Just Eat (JE), which it believes should not be trading at such a heavy discount to peers.

Analyst James Lockyer initiated coverage with a ‘buy’ recommendation and target price of 895p on the stock, which yesterday gained 19.5p to close 3% up at 671.5p.

Lockyer noted ‘its huge incremental opportunity in key markets’ driven by an ‘increasing online penetration of takeaways, which remains below 50% in many markets’, as well as a broadening of its business model.

‘Moreover, our proprietary intelligence analysis suggests positive trends for Just Eat across a number of bases,’ he said.

‘On a growth-adjusted basis, Just Eat trades at a 37% discount to its peer group price/earnings, we think the common narrative surrounding valuation deserves to change.’

Key stats
Market capitalisation£7,865m
No. of shares out499m
No. of shares floating482m
No. of common shareholdersnot stated
No. of employees13767
Trading volume (10 day avg.)2m
Turnover£2,546m
Profit before tax£408m
Earnings per share80.97p
Cashflow per share174.69p
Cash per share2.58p

Ashtead share fall create buying opportunity, says Jefferies

The dream of a Donald Trump-fuelled infrastructure boom is fading but it has provided an ‘appealing’ entry point for Ashtead (AHT) shares, says Jefferies.

Analyst Justin Jordan reaffirmed his ‘buy’ recommendation and target price of £20.00 on the equipment rental company after a 10% fall in Ashtead shares since their 1 March high. The shares edged 2.2p higher yesterday to £15.73.

The shares now trade on 14.4 times 2017 earnings. Jordan added that the key risks for Ashtead, which relies on the US for around 85% of its business, were macroeconomic headwinds impacting utilisation and price, and foreign exchange impacting profits and earnings per share.

The shares trading at a premium to US rental peers ‘reflecting Ashtead’s faster growth, lower leverage and sector leading return on invested capital’.

Key stats
Market capitalisation£5,009m
No. of shares out1,552m
No. of shares floating1,539m
No. of common shareholdersnot stated
No. of employees592897
Trading volume (10 day avg.)4m
Turnover£7,590m
Profit before tax£201m
Earnings per share13.00p
Cashflow per share24.77p
Cash per share57.68p

Hargreaves predicts dividend growth at G4S

Dividends are expected to grow at G4S (GFS) as the security company continues to restructure and improve margins, says Hargreaves Lansdown.

The company is set to rejoin the FTSE 100 which analyst Nicholas Hyett said was the company’s reward for shedding 29 ‘average’ businesses. Another 27 businesses ‘remain on the block’.

‘Growth in its remaining business, combined with a greatly improved margin, has dramatically improved profits and is being rewarded with a return to the FTSE 100,’ he said.

‘The group is targeting a net debt to earnings ratio of under 2.5x, and with that line likely to be crossed by the end of 2017, dividends look set to grow.’

The shares softened 0.9% on Wednesday to close 3p lower at 323p.

Key stats
Market capitalisation£83,904m
No. of shares out4,917m
No. of shares floating4,857m
No. of common shareholdersnot stated
No. of employees99827
Trading volume (10 day avg.)9m
Turnover£27,889m
Profit before tax£912m
Earnings per share18.60p
Cashflow per share57.77p
Cash per share101.55p

GSK faces competition on HIV treatment, says Deutsche Bank

GlaxoSmithKline (GSK) is being put under pressure by competitor Gilead’s announcement it has positively trialled a new HIV treatment, says Deutsche Bank.

Analyst Richard Parkes retained his ‘hold’ recommendation and target price of £17.20 on the stock following the news that Gilead had announced positive results from four Phase III trials of its bictegravir HIV treatment.

The shares added 35p or 2% to £17.08 on Wednesday. ‘The news crystallises a known competitive risk and is likely to put pressure on GSK’s most profitable growth driver,’ he said.

Parkes said the news ‘alleviates a small risk that bictegravir would have superior efficacy to [GSK product] dolutegravir, so should lead to some relief’.

‘We expect detailed data to be presented at a medical conference later this year and it remains possible numerical difference in efficacy may favour one or other of the drugs,’ he said.

‘However, we remind investors that Gilead’s ability to combine bictegravir with its TAF backbone, seen as preferred by most physicians, make it a serious competitor.’

Key stats
Market capitalisation£2,132m
No. of shares out367m
No. of shares floating361m
No. of common shareholdersnot stated
No. of employees1412
Trading volume (10 day avg.)1m
Turnover£492m
Profit before tax£164m
Earnings per share44.58p
Cashflow per share48.03p
Cash per share89.95p

Shore wants margin of safety from IG Group

IG Group (IGG) was not the target of the City regulator’s review of leveraged trading but Shore Capital wants to see a higher margin of safety before taking a more positive stance.

Analyst Paul McGinnis retained his ‘hold’ recommendation and a ‘fair value’ price of 570p on the stock, which gained 25.6p, or 4.6%, to 579p yesterday.

He said the higher average client value at IG Group, along with its well-run business model, were not the target of the Financial Conduct Authority (FCA) review.

‘The shares have recovered from a low of c.450p in the immediate aftermath of the FCA proposals in December meaning that the investment case currently looks to be a fairer balance of risk and reward,’ he said.

‘However, our forecasts are still potentially subject to material revision based on the final outcome, meaning we would need a higher margin of safety to be more explicitly positive.’

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Look up the shares

  • Just Eat PLC (JE.L)
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  • GlaxoSmithKline PLC (GSK.L)
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  • Ashtead Group PLC (AHT.L)
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  • G4S PLC (GFS.L)
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  • IG Group Holdings PLC (IGG.L)
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