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The Expert View: Kingfisher, William Hill and 888

Our daily roundup of analyst commentary on shares, also including Aggreko and Spirax-Sarco.

by Michelle McGagh on May 10, 2017 at 05:00

If you would like to receive news alerts on any of the stocks mentioned in The Expert View, click on the star icons below to add them to your favourites.
Key stats
Market capitalisation£7,615m
No. of shares out2,226m
No. of shares floating2,212m
No. of common shareholdersnot stated
No. of employees77000
Trading volume (10 day avg.)14m
Turnover£11,225m
Profit before tax£610m
Earnings per share26.96p
Cashflow per share38.14p
Cash per share35.49p

Macron victory could help Kingfisher, says Jefferies

Victory for Emmanuel Macron in the French presidential elections should be good news for B&Q owner Kingfisher (KGF) in time, says Jefferies.

Analyst James Grzinic retained his ‘hold’ recommendation and target price of 325p on the stock ahead of first quarter results on 24 May. The shares were trading down 0.9%, or 3.2p, at 339p at the time of writing.

‘A modicum of caution feels warranted given the extent of assortment changes hitting stores in the current season. And with Homebase a likely reduced source of share from here, sentiment may remain mixed,’ he said.

‘Still, while upcoming first quarters should reiterate French market share underperformance, growing appetite for improving French cyclical exposure should not be overlooked, at the appropriate time.’

He added that he was ‘still neutral’ on the stock ‘as UK risks and French opportunities are broadly balanced out’.

Key stats
Market capitalisation£2,592m
No. of shares out858m
No. of shares floating852m
No. of common shareholdersnot stated
No. of employees16286
Trading volume (10 day avg.)4m
Turnover£1,604m
Profit before tax£165m
Earnings per share18.80p
Cashflow per share28.70p
Cash per share24.29p

Hargreaves Lansdown: William Hill ends losing streak but challenges remain

William Hill’s (WMH) losing streak seems to have come to an end but Hargreaves Lansdown is still cautious about the impact regulation will have in the future.

The bookmaker reported a positive start to the year, with net revenue up 9% since the start of the year. The shares rose 1.7p to 301p on the news.

Analyst George Salmon said: ‘They say the house always wins, but after something of a losing streak, it’s more about getting the house in order for new chief executive Philip Bowcock.

‘One challenge is to breathe new life into the Australian business. With the average Australian adult losing close to $1,000 a year, bookmaking is big business Down Under.’

However, he added the ‘elephant in the room’ for William Hill was the ‘looming uncertainty over fixed odds betting terminals’.

‘Calls for a crackdown on these machines are getting louder all the time, and with 30% net revenue coming from its fleet of gaming machines last year, increased regulation would certainly hurt,’ said Salmon.

Key stats
Market capitalisation£1,053m
No. of shares out360m
No. of shares floating176m
No. of common shareholdersnot stated
No. of employees1353
Trading volume (10 day avg.)2m
Turnover403m USD
Profit before tax40m USD
Earnings per share0.11 USD
Cashflow per share0.15 USD
Cash per share0.37 USD

Don’t jump off the 888 rocket, says Peel Hunt

Online gambling company 888 (888) has further to go says Peel Hunt, which still rates the stock a ‘buy’.Analyst Ivor Jones increased his target price from 260p to 350p. The shares were up 1p at 290p at the time of writing.

‘The share price has blown through our target price and shrugged off going ex the final and special dividend,’ he said.

‘We believe there is further to go; slower-growing competitors are going to need a little of 888’s rocket fuel.’

He added the company was ‘not waiting around for suitor’ and was continuing to take advantage of its ‘unified technology platform to enter and prepare for entry into regulating geographic markets’.

‘Structural growth potential, a willingness to distribute surplus cash and takeover potential all lead us to reiterate our “buy” rating,’ said Jones.

Key stats
Market capitalisation£2,189m
No. of shares out256m
No. of shares floating230m
No. of common shareholdersnot stated
No. of employees6090
Trading volume (10 day avg.)1m
Turnover£1,515m
Profit before tax£125m
Earnings per share49.02p
Cashflow per share160.78p
Cash per share17.18p

Aggreko won’t turn around this year, says Berenberg

Berenberg believes the chief executive of Aggreko (AGGK) called an inflection point too soon, arguing the temporary power provider will not see a turnaround this year.

Analyst Josh Puddle retained his ‘hold’ recommendation and target price of 800p on the stock, which was trading down 1.1%, or 10p, at 856p at the time of writing.

‘The key driver behind valuation at a rental business is return on capital invested (ROIC),’ he said. ‘Aggreko’s ROIC has fallen in a straight line from its peak of 25% in full-year 2010 to just 10% in full-year 2016.’

The chief executive of Aggreko, Chris Weston, said in August 2015 that returns should start to inflect positively in full-year 2017 but Puddle disagrees.

‘Given that the order intake year-to-date has been significantly below the prior year’s and pricing in the power projects utility segment remains under pressure, we believe an inflection is unlikely. In fact, we expect another contraction in ROIC in full year 2017 to 8%.’

Key stats
Market capitalisation£3,782m
No. of shares out74m
No. of shares floating72m
No. of common shareholdersnot stated
No. of employees4998
Trading volume (10 day avg.)m
Turnover£757m
Profit before tax£121m
Earnings per share164.81p
Cashflow per share209.78p
Cash per share162.76p

Numis downgrades Spirax-Sarco after price rise

Numis is looking for a more attractive price on Spirax-Sarco (SPX) and has therefore downgraded the engineering company.

Analyst David Larkam cut his recommendation from ‘add’ to ‘hold’ but retained his £52.50 target price on the stock, which was trading flat at £51.78 at the time of writing.

The shares have risen 25% year-to-date and currently trade on a forward price-earnings ratio of 26 times.

Larkam said it was a ‘quality company with proven long-term returns' but that investors should wait for a better entry opportunity.

He added that the German steam acquisition had been completed and this was a ‘strategically excellent deal effectively combining Spirax strength across Europe with Gestra’s and its German stronghold’.

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  • Kingfisher PLC (KGF.L)
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  • 888 Holdings PLC (888.L)
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  • William Hill PLC (WMH.L)
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  • Spirax-Sarco Engineering PLC (SPX.L)
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  • Aggreko PLC (AGGK.L)
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