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The Expert View: Kazakhmys, Rentokil Initial and Pace

A round-up of analyst notes, including their take on Howden Joinery and Next Fifteen Communications.

by Harry Brooks on Mar 05, 2012 at 05:01

We’ve rounded up some of the best comment from top analysts to give you their views on Kazakhmys, Rentokil Initial, Pace, Howden Joinery and Next Fifteen Communications.

Key stats
Market capitalisation£5,326m
No. of shares out532m
No. of shares floating190m
No. of common shareholdersnot stated
No. of employees58738
Trading volume (10 day avg.)2m
Turnover2,029m USD
Profit before tax870m USD
Earnings per share1.63 USD
Cashflow per share1.92 USD
Cash per share1.72 USD

*Correct as at 2 Mar 2012

Numis downgrades Kazakhmys on lower production forecast

Cailey Barker, analyst at Numis, has downgraded UK-registered copper mining company Kazakhmys (KAZ.L) from 'hold' to 'reduce' based on a lower medium-term production outlook.

Full-year earnings before interest, taxes, depreciation and amortisation came in at £1.24 billion, ahead of Barker's prediction but virtually flat year-on-year. The results came as soaring wage bills for skilled staff in Kazakhstan offset higher copper prices.

The group's latest production outlook is lower than Barker had expected, with copper production flatlining at 285,000-295,000 tonnes per annum until 2015, as a result of the Aktogay facility now being scheduled to open a year later than the analyst had pencilled in.

As a result, she has opted to downgrade the stock, and has reduced her target price to £9.50 from £11 previously.

Shares in the group closed at £10.22 on Friday, down 39.9p or 3.76%.

Key stats
Market capitalisation£1,371m
No. of shares out1,808m
No. of shares floating1,794m
No. of common shareholdersnot stated
No. of employees66364
Trading volume (10 day avg.)4m
Profit before tax£-23m
Earnings per share-1.30p
Cashflow per share13.69p
Cash per share4.50p

*Correct as at 2 Mar 2012

Oriel says 'add' Rentokil Initial as dividends resume

Hector Forsythe, analyst at Oriel Securities, has stuck with his 'add' recommendation on many-armed services group Rentokil Initial (RTO.L) following results that he said were 'just about in line' and the resumption of dividend payments.

The business recorded a £50.5 million pre-tax loss in 2011, down from a £14.5 million profit in 2010 as a result of continuing problems at its City Link courier business. The unit recorded a loss of £31.3 million last year, up from £9.6 million in 2010.

However, encouraged by better performance in its other units, the company has opted to resume dividend payments of 1.33p, equal to 2p a share for the full year.

On the future of the courier business, Forsythe said 'The debate will be about what it will take to pull the plug on City Link. The new team there are clearly optimistic about their ability to improve performance and give it a future. There needs to be demonstrable improvement an early point to warrant not closing it.'

Shares in the group closed at 75.75p on Friday, down 4.7p or 5.84%.

Key stats
Market capitalisation£273m
No. of shares out305m
No. of shares floating253m
No. of common shareholdersnot stated
No. of employees1112
Trading volume (10 day avg.)1m
Turnover1,297m USD
Profit before tax49m USD
Earnings per share0.16 USD
Cashflow per share0.33 USD
Cash per share0.27 USD

*Correct as at 2 Mar 2012

Collins Stewart downgrades Pace on 'multitude of uncertainties'

Jonathan Imlah, analyst at Collins Stewart, has downgraded set-top box maker Pace (PIC.L) to 'hold' based on concerns ranging from supply constraints to the long-term threat of internet TV.

Imlah said that although shares in the company appear cheap according to conventional metrics, the group faces 'a multitude of uncertainties'.

First up, there's the ongoing fallout from last year’s severe flooding in Thailand, which reduced the supply of a range of parts needed for building set-top boxes.

Second, a new management team at the company adds an extra level of uncertainty in what is already a rapidly shifting sector, Imlah said.

Longer term, the encroachment of global technology behemoths such as Apple and Google into programme delivery is likely to accelerate the move towards internet-based delivery, potentially rendering set-top boxes obselete.

Shares in Pace closed at 89.31p on Friday, up 0.31p or 0.35%.

Key stats
Market capitalisation£790m
No. of shares out634m
No. of shares floating600m
No. of common shareholdersnot stated
No. of employees5954
Trading volume (10 day avg.)1m
Profit before tax£67m
Earnings per share10.84p
Cashflow per share13.78p
Cash per share6.09p

*Correct as at 2 Mar 2012

Singer snips Howden Joinery's EPS forecast on pension deficit worries

Matthew McEachran, analyst at Singer Capital Markets, has predicted a decline in earnings per share (EPS) this year at kitchen cabinet business Howden Joinery (HWDN.L) based partly on the company's hefty pension deficit.

Full-year 2011 profits before tax came in at £109.9 million, £2 million higher than McEachran's forecast, and up 9% on 2010.

However, the analyst cautioned that the company's pension deficit now stands at £137 million, which will be a drain on the company's finances. With this in mind, McEachran predicts the group's EPS to fall 4% this year.

'With an actuarial review under way (which will use gilt not corporate bond yields),' he said, 'management are cautiously guiding to a deficit recovery plan that at best will match the existing one. This means a £40 million cash injection in 2012.' The sizable deficit is a legacy from when Howden was part of MFI Group.

Shares in the company, which is a member of Citywire Top Stocks®, closed at 125.23p on Friday, down 0.27p or 0.21%.

Key stats
Market capitalisation£52m
No. of shares out57m
No. of shares floating38m
No. of common shareholdersnot stated
No. of employees1067
Trading volume (10 day avg.)0m
Profit before tax£5m
Earnings per share7.82p
Cashflow per share13.74p
Cash per share15.35p

*Correct as at 2 Mar 2012

Westhouse makes its case for Next Fifteen Communications

Roddy Davidson, analyst at Westhouse Securities, has awarded public relations holding company Next Fifteen Communications (NFC.L) a 'strong buy' recommendation based on its strength in the US technology sector.

The analyst said that the international public relations, corporate communications and digital marketing firm is on course to deliver strong medium-term earnings as a result of its 'exposure to the US tech sector, enviable blue -chip client list and growing digital competency'.

Davidson also noted that the company has been subject to informal approaches in the past, and he believes there's a good chance of a bid in the not-too-distant future.

'The group boasts an impressive roster of longstanding blue chip clients, an experienced management team and has established a strong niche in the dynamic/fast-growing technology sector, particularly in the US,' he said.

It should be noted that Westhouse Securities acts as a market maker for Next Fifteen Communications.

Shares in the group, for which Davidson has a target price of 128p, closed at 92p on Friday, up 1.5p or 1.66%.

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  • Next Fifteen Communications Group PLC (NFC.L)
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  • Howden Joinery Group PLC (HWDN.L)
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  • Pace PLC (PIC.L)
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  • Kazakhmys PLC (KAZ.L)
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  • Rentokil Initial PLC (RTO.L)
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