The Expert View: Morrisons, Barclays and Aviva

Our daily round-up of analyst recommendations and commentary, featuring Morrisons, Barclays, Aviva, ITV and Max Petroleum.

Key stats
Market capitalisation	£6,216m
No. of shares out	2,409m
No. of shares floating	2,051m
No. of common shareholders	not stated
No. of employees	57169
Trading volume (10 day avg.)	5m
Turnover	£17,663m
Profit before tax	£690m
Earnings per share	26.03p
Cashflow per share	38.86p
Cash per share	9.52p

*Correct as at 2 Jan 2013

Jeffries cuts target price for Morrisons

James Grzinic, analyst at Jeffries, has cut his target price for Morrisons (MRW.L), believing more shoppers opted to stock up on eggnog and mince pies online and at the discount outlets instead.

Recent share-price movements reflect weakening momentum, Grzinic said. 'We expect hard discounters to have experienced a disproportionate improvement in market share over Christmas, particularly in the North of England,' Grzinic said. 'Secondly, more affluent consumers' migration to online shopping seems to have accelerated over the festive season.'

As a result, he expects like-for-like (LFL) ex-fuel sales to have fallen 2.8% in the six weeks to the end of the year, in spite of the extra day of trading compared with last year. His target price falls from 330p to 310p.

Nonetheless, he retains a 'buy' recommendation on the shares, expecting the LFLs to improve from -1.7% in 12/13 to 0.5% in 13/14.

'Valuation levels remain remarkably depressed,' he added, 'with a 2013 calendarised price to earnings of about 9x (and yield approaching 5%) assuming ongoing downgrades and largely ignoring the structural opportunity for further balance sheet releverage'.

Shares in the group closed at 257.79p on Friday, down 5.2p or 1.9%.

Key stats
Market capitalisation	£33,482m
No. of shares out	12,241m
No. of shares floating	10,494m
No. of common shareholders	not stated
No. of employees	139000
Trading volume (10 day avg.)	29m
Turnover	£20,589m
Profit before tax	£3,007m
Earnings per share	24.01p
Cashflow per share	40.26p
Cash per share	876.25p

*Correct as at 2 Jan 2013

Investec projects 12% return for Barclays investors this year

Ian Gordon, analyst at Investec, has increased his target price for Barclays (BARC.L), retaining his 'buy' recommendation in spite of a whopping 79% rally in the shares over the past five months.

The shares have rerated from 0.4 times estimated 2012 tangible net asset value (TNAV) five months ago to around 0.7 times now, Gordon said, which is in line with RBS but below Lloyds.

'Looking back on the past six months, it has been a formidable journey for Barclays, with an unprecedented, (and in our view unwarranted), level of regulatory and media attack,' he said. 'To its credit, a clear strategic focus has been maintained, operational performance has improved and a material re-rating has been enjoyed over the past five months.'

However, Gordon said the rally has a little further to go: 'trading on just 0.7x 2012e TNAV, with a circa 7% return on equity in 2013e rising to about 10% by 2015e, we expect a circa 12% total shareholder return over the next 12 months, and we retain a Buy recommendation.'

Shares in the group closed at 273.93p on Wednesday, up 11.5p or 4.4%.

Key stats
Market capitalisation	£11,224m
No. of shares out	2,918m
No. of shares floating	2,885m
No. of common shareholders	not stated
No. of employees	36562
Trading volume (10 day avg.)	8m
Turnover	£36,003m
Profit before tax	£483m
Earnings per share	16.68p
Cashflow per share	34.47p
Cash per share	793.02p

*Correct as at 2 Jan 2013

Canaccord lifts target price for Aviva

Ben Cohen, analyst at Canaccord, has increased his target price for insurance giant Aviva (AV.L), saying it's making progress selling off underperforming assets and strengthening its capital levels.

On the Friday before Christmas Aviva announced it has sold its US division (excluding the asset management business) to Athene Holding for $1.8 billion (£1.1 billion), and earlier in the week it reached a settlement with Bankia on the termination of their Aseval joint venture in Spain.

These sales increase Aviva’s economic solvency ratio by 21%, from 144% in the third quarter to 165%, Cohen said, with a 4% rise from Bankia and a 17% rise from the US sale.

'Aviva has shown steady progress in restructuring to improve capital efficiency and earnings, shifting its portfolio to improve new business profitability, at the expense of volumes,' he added. 'We forecast the economic surplus to improve further in 2013E to 169%, allowing retained earnings.'

Cohen has a 'hold' recommendation on the shares, and his target price rises 15% to 383p.

Shares in the group closed at 383.36p on Wednesday, up 10.36p or 2.78%.

Key stats
Market capitalisation	£4,361m
No. of shares out	4,035m
No. of shares floating	3,603m
No. of common shareholders	not stated
No. of employees	3958
Trading volume (10 day avg.)	9m
Turnover	£2,140m
Profit before tax	£247m
Earnings per share	6.20p
Cashflow per share	8.10p
Cash per share	20.60p

*Correct as at 2 Jan 2013

Westhouse backs ITV's latest acquisition

Roddy Davidson, analyst at Westhouse, has reiterated his 'buy' recommendation on ITV (ITV.L) following its partial acquisition of US-based Gurney Productions.

ITV has taken a 61.5% stake in Gurney, which makes factual entertainment and reality programmes, for an initial sum of $40 million, with an option to buy the remaining 38.5% over the coming years.

'We are encouraged by this acquisition which represents another step towards the group’s goal of building its content base, internationalising its business and reducing the proportion of its revenues derived from advertising,' Davidson said.

'It also adds to the impetus generated last week by news that a dispute between Group M (WPP’s media buying arm) and Channel 4 over airtime costs could provide a short-term boost to its share of advertising spend.'

The analyst's target price rises from 5p to 125p to reflect what he called 'positive momentum' within the group.

Shares in the group closed at 108.48p on Friday, up 3.3p or 3.1%.

Key stats
Market capitalisation	£40m
No. of shares out	1,050m
No. of shares floating	736m
No. of common shareholders	not stated
No. of employees	161
Trading volume (10 day avg.)	2m
Turnover	31m USD
Profit before tax	-5m USD
Earnings per share	-0.01 USD
Cashflow per share	0.01 USD
Cash per share	0.00 USD

*Correct as at 2 Jan 2013

Merchant Securities reinstates 'buy' on Max Petroleum

Brendan Long, analyst at Merchant Securities, has upgraded Max Petroleum (MXP.L) to 'buy' after shareholders approved a financial restructuring plan just before the Christmas break.

The analyst said the most noteworthy outcome of the vote was that more bondholders elected to receive shares instead of cash, suggesting they have confidence in the company.

'As a result of the mentioned changes we are reinstating a target price of 6.3p/share from under review (prior to placing our target price under review on 18 December 2012 we had a target price of 6.4p/share),' the analyst said. 'We are also reinstating a BUY recommendation from under review.'

Shares in the group closed at 3.7p on Friday, down 0.15p or 4%.