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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.
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%.
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%.
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%.
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%.
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%.
More about this:
Look up the shares
- Next Fifteen Communications Group PLC (NFC.L)
- Howden Joinery Group PLC (HWDN.L)
- Pace PLC (PIC.L)
- Kazakhmys PLC (KAZ.L)
- Rentokil Initial PLC (RTO.L)