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The Expert View: Kier, Standard Life Aberdeen and Savills

Our daily roundup of analyst commentary on shares, also including OneSavingsBank and Cineworld.

by Michelle McGagh on Mar 16, 2018 at 05:00

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Key stats
Market capitalisation£1,010m
No. of shares out97m
No. of shares floating92m
No. of common shareholdersnot stated
No. of employees17940
Trading volume (10 day avg.)m
Turnover£4,112m
Profit before tax£143m
Earnings per share15.24p
Cashflow per share67.66p
Cash per share532.31p

Kier looking cheap, says Liberum

Interim results at construction and property group Kier (KIE) are a little weaker than expected but Liberum says the shares are the cheapest they have been in five years.

Analyst Joe Brent retained his ‘buy’ recommendation and target price of £16.00 on the stock despite the company reporting a net debt increase from £147 million at full-year 2017 to £239 million.

He said the order book remained ‘broadly stable’ but construction revenues were ‘weak due to some delays and margins were restrained by a one-off...hit on the Caribbean’.

‘Current year 2018 enterprise value/earnings of 7.9x is a little above the sector average,’ he said. ‘Current year 2018 dividend yield of 6.6% looks affordable. Comparing Kier’s valuation to the mid-cap price earnings, they are the cheapest that they have been at any time in the last five years.’

The shares fell 3.7% to £10.38 at the time of yesterday.

Key stats
Market capitalisation£11,009m
No. of shares out2,979m
No. of shares floating2,865m
No. of common shareholdersnot stated
No. of employees7768
Trading volume (10 day avg.)7m
Turnover£16,706m
Profit before tax£1,181m
Earnings per share29.62p
Cashflow per share36.91p
Cash per share343.28p

Jefferies: Standard Life Aberdeen can recover lost earnings

Earnings lost at Standard Life Aberdeen (SLA) through the disposal of its life operation and loss of its Scottish Widows investment mandate can be made up by a share buyback, says Jefferies.

Analyst Phil Dobbin retained his ‘buy’ recommendation but reduced the target price from 503p to 469p on the shares, which rose 1.8% to 372.6p yesterday.

‘We model the impact on future earnings per share from the disposal of the life operation and the expected loss of the Scottish Widows Investment Partnership mandate,’ he said.

‘We note that in our modelling this causes reported adjusted earnings per share to fall to 23.3p in 2019. We calculate that Standard Life Aberdeen can recover its disposed earnings by buying back up to £2 billion of shares and we would hope to see greater clarity on returns to shareholders.’

Key stats
Market capitalisation£1,391m
No. of shares out142m
No. of shares floating132m
No. of common shareholdersnot stated
No. of employees32361
Trading volume (10 day avg.)m
Turnover£1,446m
Profit before tax£143m
Earnings per share47.72p
Cashflow per share62.27p
Cash per share159.93p

Numis: Savills to bounce back this year

Numis is expecting estate agent Savills (SVS) to bounce back as cost headwinds reduce and profits grow in Europes.

Analyst Chris Millington retained his ‘add’ recommendation and target price of £11.20 on the stock after in-line 2017 results.

‘In 2018 we expect US profits to bounce back due to fewer cost headwinds, and profit growth in Europe and the less-transaction businesses,’ he said.

‘This is expected to offset our expectation of tougher transactional markets in the UK and Asia and lead to a flat profit profile overall. Savills' global reach and end market diversification remain a key attraction of the group.’

The shares inched 3.5p higher to 979.5p yesterday.

Key stats
Market capitalisation£938m
No. of shares out243m
No. of shares floating237m
No. of common shareholdersnot stated
No. of employees775
Trading volume (10 day avg.)1m
Turnover£310m
Profit before tax£143m
Earnings per share49.43p
Cashflow per share50.49p
Cash per share0.17p

Shore Capital: weakness at OneSavings Bank is a buying opportunity

OneSavings Bank (OSBO) has reported full-year results ahead of expectations but Shore Capital warns there are margin pressures and regulatory costs that will hit this year.

Analyst Gary Greenwood retained his ‘buy’ recommendation and ‘fair value’ of 585p on the shares, which fell 6.5% to 379.8p yesterday.

‘Guidance is a little more cautious, reflecting some margin pressure and higher regulatory costs and this is likely to put some downward pressure on forecasts for 2018,’ he said.

‘This may take the shine off the results, but we would view any associated share price weakness as a good buying opportunity.’

He added: ‘Notwithstanding a slower overall buy-to-let market, some margin pressure and additional regulatory costs, we believe that OneSavings Bank is well positioned to continue growing its loan book and profit base over the medium term through further market share gains as mainstream lenders withdraw from the professional landlord market on which the group is primarily focused.’

Key stats
Market capitalisation£3,398m
No. of shares out1,370m
No. of shares floating979m
No. of common shareholdersnot stated
No. of employees9946
Trading volume (10 day avg.)7m
Turnover£798m
Profit before tax£169m
Earnings per share13.40p
Cashflow per share22.98p
Cash per share9.22p

Peel Hunt predicts Cineworld rerating over next two years

Shares in Cineworld (CINE) have derated to levels not seen since 2012 but Peel Hunt is confident the management will be able to boost the rating over the next two years.

Analyst Douglas Jack retained his ‘buy’ recommendation and target price of 270p on the shares, which jumped 2.7% to 246.7p yesterday.

He noted full-year results that reported profit before tax rising 15% to £127.5 million driven by increased box office revenue of 6.5% in the UK and 8.2% overseas.

‘Management has retained the current dividend payout ratio,’ he said. ‘This equates to a dividend yield of 5.8% based on 2019 earnings. The shares have derated to levels - 7.7x 2019 enterprise value / earnings - last seen in 2012.

‘Management has a strong track record for generating good returns from acquisitions: we believe reinvigorating the Regal estate and driving extra synergies should boost the rating over the next two years.’

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Look up the shares

  • Cineworld Group PLC (CINE.L)
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  • Kier Group PLC (KIE.L)
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  • OneSavings Bank PLC (OSBO.L)
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  • Savills PLC (SVS.L)
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  • Standard Life Aberdeen PLC (SLA.L)
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