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The Expert View: Ocado, Standard Chartered & Pendragon

Our daily roundup of analyst commentary on shares, including Primary Health Properties and Speedy Hire.

by Michelle McGagh on May 03, 2018 at 05:01

Key stats
Market capitalisation£3,724m
No. of shares out664m
No. of shares floating454m
No. of common shareholdersnot stated
No. of employees12799
Trading volume (10 day avg.)2m
Turnover£1,464m
Profit before tax£85m
Earnings per share0.16p
Cashflow per share11.53p
Cash per share24.54p

Numis upgrades Ocado on new deal

Numis Securities has upgraded Ocado (OCDO) after the online supermarket signed another deal with Swedish grocery chain ICA Group.

Analyst Andrew Wade lifted his recommendation from ‘add’ to ‘buy’ with a target price of 700p on the stock after Ocado agreed a deal for ICA – which has 1,300 stores and revenue of £9 billion – to use its platform.

‘This is clearly another encouraging piece of news for Ocado, representing its third recent major deal,’ he said.

Wade said that Ocado has the best ‘end-to-end solution for third-party grocery retailers’ and ‘with the industry evolving rapidly, grocery retailers are having to make big decisions on how to adapt and Ocado is offering the best-in-class solution to address the online issue’.

‘We continue to expect more deals, and believe Ocado is building a very valuable business,’ he said.

Ocado shares rose 19.6p on Wednesday to close 3.5% up at 575p.

Key stats
Market capitalisation£24,965m
No. of shares out3,302m
No. of shares floating3,283m
No. of common shareholdersnot stated
No. of employees86021
Trading volume (10 day avg.)7m
Turnover10,484m USD
Profit before tax4,067m USD
Earnings per share0.22 USD
Cashflow per share0.41 USD
Cash per share25.64 USD

Hargreaves: Standard Chartered results are a turning point

Standard Chartered (STAN) returned to growth in its underlying business in the first quarter, which Hargreaves Lansdown believes is an important turning point for the emerging markets bank.

Income growth drove and a modest decline in bad loans saw operating profits rise 20% to $1.3 billion prompting aalyst Nicholas Hyett said he had been worried the recovery at the bank ‘was being driven by cost savings rather than income growth’.

‘That’s not an accusation you can level this time round. Income growth is right at the top end of target, and all the cost discipline over recent years means it’s dropping straight through to profits,’ he said.

‘The fact Standard Chartered has reported double-digit income growth in the first few weeks of the quarter might leave some disappointed by these numbers, but we still feel they mark an important turning point.’

That proved to be the case with the shares slipping nearly 8p or 1% to 761.5p on Wednesday.

Key stats
Market capitalisation£404m
No. of shares out1,417m
No. of shares floating1,339m
No. of common shareholdersnot stated
No. of employees9989
Trading volume (10 day avg.)4m
Turnover£4,739m
Profit before tax£154m
Earnings per share3.74p
Cashflow per share8.11p
Cash per share3.74p

Jefferies: Pendragon loses speed

The first quarter was much worse than expected for car dealership Pendragon (PDG) although cost savings helped prop up results, says Jefferies.

Analyst Will Kirkness retained his ‘hold’ recommendation and target price of 25p on the stock, which slipped 5%, or 1.5p, to 28p yesterday.

First quarter profit before tax of £15 million was 54% lower year-on-year from £32.4 million.

‘[The results were] a touch worse than our anticipation of -50% year-on-year and was driven by known weakness in new car sales against the peak comparison but was also dragged down by a weaker used car gross profit performance than expected due to a one-off issue around age mix,’ said Kirkness.

However, he added that ‘these headwinds were offset to some degree by a cost savings programme that saved £3.9 million of like-for-like costs in the period’.

Liberum upgrades Primary Health Properties after capital raise

Liberum has upgraded Primary Health Properties (PHP) after the real estate investment trust (Reit) focused on doctors’ surgeries increased the amount of money it is raising from shareholders.

Analyst David Brockton hiked his recommendation from ‘hold’ to ‘buy’ with a target price of 120p after the trust expanded its equity raising from £100 million to £115 million.

‘The raise provides firepower to deliver the group’s £155 million acquisition pipeline and is marginally accretive to net asset value, but dilutive to earnings in the current year,’ he said.

‘The equity raise places PHP in a strong position to further consolidate the UK primary health property market, accelerate expansion in Ireland and drive further economy of scale benefits within the business.’

He added that the trust offers ‘long-term predictable returns with low relative risk’.

Key stats
Market capitalisation£285m
No. of shares out524m
No. of shares floating502m
No. of common shareholdersnot stated
No. of employees3641
Trading volume (10 day avg.)m
Turnover£369m
Profit before tax£65m
Earnings per share2.21p
Cashflow per share10.97p
Cash per share1.07p

Good entry point for Speedy Hire, says Peel Hunt

Investors could be pleasantly surprised by the forthcoming annual results from Speedy Hire (SDY), says Peel Hunt.

Following recent weakness in the shares of the tool-hire firm analyst Andrew Nussey retained his ‘buy’ recommendation and target price of 65p.

‘We expect little surprise in the reported results given the positive pre-close [trading statement],’ said Nussey. ‘Our focus is on the outlook, where despite the Carillion “road bump” and competitive pressures, there is upside risk to consensus market and return on capital employed expectations.’

The analyst added that the company’s balance sheet strength increases the ‘potential for further accretive bolt-ons/investment’.

‘Shares trading on 11.6x times March 2019 fail to reflect the trading momentum, the returns path, and strategic value,’ said Nussey. ‘The recent weakness provides a good entry point.’

The shares firmed 0.8p or 1.5% to 54.4p.

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  • Ocado Group PLC (OCDO.L)
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  • Pendragon PLC (PDG.L)
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  • Primary Health Properties PLC (PHP.L)
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  • Speedy Hire PLC (SDY.L)
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  • Standard Chartered PLC (STAN.L)
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