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The Expert View: Majestic Wine, Ocado and Intertek

Our daily round-up of analyst recommendations and commentary, also featuring MITIE Group and Mothercare.

by Harry Brooks on Nov 20, 2012 at 05:01

Our daily round-up of analyst recommendations and commentary, featuring Majestic Wine, Ocado, Intertek, MITIE Group and Mothercare.

Key stats
Market capitalisation£305m
No. of shares out65m
No. of shares floating59m
No. of common shareholdersnot stated
No. of employees946
Trading volume (10 day avg.)0m
Profit before tax£17m
Earnings per share26.07p
Cashflow per share33.12p
Cash per share4.67p

*Correct as at 19 Nov 2012

Liberum Capital backs Majestic Wine

Patrick Coffey, analyst at Liberum Capital, has reiterated his 'buy' recommendation on booze warehouse chain Majestic Wine (MJW.L) on the back of half-yearly results that matched his expectations.

Like-for-like (LFL) sales over the past six months were up 0.6%, slighly shy of Coffey's 1% estimate, but pre-tax profits of £9.2 million beat his forecast of £9.1 million.

The second half of the company's financial year has started solidly, the analyst said, with LFL sales up 1.2%, but really it's all about sales this month and next. 'Majestic is overly reliant on the November and December trading period (c.50% of profits) which provides a risk if consumer sentiment weakens further,' he warned.

A year ago the shares dropped 25% as investors worried about weak Christmas sales, but they went on to gain 53% in the four months after the festivities as Britons soaked up the seasonal spirits in the time-honoured fashion. With this in mind, Coffey said any dip in the shares would represent a buying opportunity.

Shares in the group closed at 467.78p on Monday, up 2.78p or 0.6%.

Key stats
Market capitalisation£420m
No. of shares out559m
No. of shares floating352m
No. of common shareholdersnot stated
No. of employees5180
Trading volume (10 day avg.)1m
Profit before tax£0m
Earnings per share-0.10p
Cashflow per share5.03p
Cash per share16.50p

*Correct as at 19 Nov 2012

Panmure Gordon warns Ocado remains a 'sell'

Philip Dorgan, analyst at Panmure Gordon & Co, has reiterated his 'sell' recommendation on Ocado (ODO.L) despite a bounce in the shares yesterday after the online grocer announced it had secured more funding.

The shares soared almost a quarter yesterday after Ocado announced that its banks had granted an extension to a £100 million loan facility and that it had raised £35.8 million in a placing with shareholders. It also said sales growth accelerated this quarter.

Dorgan remains unconvinced. 'Ocado now has the funds to survive for some time,' he said. 'This news, together with the short position, should see the shares rebound strongly.

'However, that does not mean that the model is suddenly a good one. Sales continue to underperform both City expectations and its multichannel competitors. Historically, Ocado has needed equity funding on a regular basis.'

Shares in the group closed at 75.04p on Monday, up 14.49p or 23.94%.

Key stats
Market capitalisation£4,529m
No. of shares out161m
No. of shares floating159m
No. of common shareholdersnot stated
No. of employees31712
Trading volume (10 day avg.)0m
Profit before tax£139m
Earnings per share85.26p
Cashflow per share145.33p
Cash per share113.57p

*Correct as at 19 Nov 2012

Accendo Markets backs Intertek as shares head south

Mike van Dulken, head of research at Accendo Markets, has reassured investors that shares in safety solutions business Intertek (ITRK.L) remain in a long-term uptrend despite a fall of around 2.8% in the wake of a mixed trading update.

Yesterday's interim management statement showed revenue growth of 20.1% and 9.1% organic. However, investors weren't impressed, which van Dulken said was likely a consequence of the slowdown in growth, with the first-half figure hitting 29.9% (9.9% organic).

Van Dulken noted that this decline in growth is broadly in line with trading patterns reported by other companies in the same sector.

'Continued global uncertainty likely to see realignment of operations which could impact the last few weeks of this year, but more importantly the beginning of 2013,' the analyst said.

Nonetheless, he's keeping faith with the shares: 'The shares remain in a long-term uptrend, having rallied from lows of 620p in October 2008. Despite the recent sell off from 2900p on the mélange of global growth concerns (Eurozone crisis, slowing China, US fiscal cliff etc.) support is available for the shares around 2700p, this having been the lows of September and October.'

Shares in the group closed at £28.26 on Monday, down 9.42p or 0.33%.

Key stats
Market capitalisation£1,015m
No. of shares out368m
No. of shares floating327m
No. of common shareholdersnot stated
No. of employees63569
Trading volume (10 day avg.)1m
Profit before tax£72m
Earnings per share19.95p
Cashflow per share28.29p
Cash per share14.70p

*Correct as at 19 Nov 2012

Liberum Capital says 'sell' MITIE Group

William Shirley, analyst at Liberum Capital, has reiterated his 'sell' recommendation on outsourcing firm MITIE Group, warning that margins look set to come under pressure.

In the first half of the year profits rose 1.9% and revenues were up 5.6%, but this translated into underlying earnings per share growth of just 1%, missing Shirley's target by 5%.

'This was principally driven by project delays in Asset Management which saw revenues fall by 39% and reported a loss of £1.9 million versus our expectation of a profit of £1.8 million,' Shirley said.

'We continue to see risks around margins, cash and acquisitions and believe the rating does not reflect the nature of the business (more Interserve/Carillion support services than Serco). Reiterate SELL.'

Shares in the group closed at 276.48p on Monday, down 13.52p or 4.66%.

Key stats
Market capitalisation£262m
No. of shares out89m
No. of shares floating86m
No. of common shareholdersnot stated
No. of employees4350
Trading volume (10 day avg.)0m
Profit before tax£-92m
Earnings per share-105.28p
Cashflow per share-79.13p
Cash per share2.03p

*Correct as at 19 Nov 2012

Seymour Pierce reiterates 'sell' on Mothercare ahead of Thursday's update

Kate Calvert, analyst at Seymour Pierce, has reiterated her 'sell' recommendation on mum and baby clothes retailer Mothercare (MTC.L) ahead of Thursday's first-half results, predicting a 'reality check' after the recent rise in the shares.

At the end of last month the shares ticked up after the second-quarter update showed UK sales up +0.3%, returning to growth after a fall of 6.7% in the first quarter.

'A reality check is expected at its H1 results when we expect Mothercare for the 28 weeks to 13 October 2012 to report a H1 loss of £2 million at the pre-tax level versus FY11 loss of £4.4 million,' Calvert said. 'Gross margin (Seymour Pierce estimate: -100 basis points) will have been impacted by promotional activity to clear stock and reinvestment into entry level price repositioning.'

The analyst warned that making Mothercare relevant to a generation of mums used to the convenience of Amazon and the supermarkets won't be easy.

Shares in the group closed at 296p on Monday, up 1.5p or 0.51%.

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