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The Expert View: Provident Financial, United Utilities and DMGT

Our daily roundup of analyst commentary on shares, also including NCC and Capital & Counties.

by Michelle McGagh on May 25, 2018 at 05:00

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Key stats
Market capitalisation£1,694m
No. of shares out253m
No. of shares floating249m
No. of common shareholdersnot stated
No. of employees4466
Trading volume (10 day avg.)1m
Turnover£1,196m
Profit before tax£607m
Earnings per share-66.40p
Cashflow per share-52.32p
Cash per share162.29p

Shore Capital: Provident on road to recovery

A £250 million bond launched from Provident Financial (PFG) shows the doorstep lender is rehabilitating itself after a year of problems.

Analyst Gary Greenwood retained his ‘hold’ recommendation and a ‘fair value’ of 640p on the stock, which fell 1.3% to 669.8p yesterday.

The group has announced a £250 million bond with a five-year maturity and a coupon of 7%.

‘The successful issue of the new bond represents a further step in Provident Financial’s rehabilitation following last year’s well documented problems, with the group now firmly on the road to recovery,’ he said.

‘The reason for maintaining our 'hold' stance is because we feel that a significant improvement in financial performance is already being priced in.’

Key stats
Market capitalisation£5,416m
No. of shares out682m
No. of shares floating680m
No. of common shareholdersnot stated
No. of employees5310
Trading volume (10 day avg.)3m
Turnover£1,704m
Profit before tax£998m
Earnings per share63.53p
Cashflow per share116.96p
Cash per share36.34p

United Utilities facing tough headwinds, says Hargreaves

Limits on returns mean there are typically few surprises in United Utilities’ (UU) results but Hargreaves Lansdown says regulation is causing waves for the water company.

Headline numbers in the full-year results were broadly in line but a £7 million penalty from the regulator limited return on regulated equity to 7.7%. The final dividend roses 2.2% to 26.49p per share, taking the total dividend to 39.73p.

Analyst George Salmon said Ofwat had ‘prepped the industry for tougher conditions from 2020’ and that ‘is a particular worry for United Utilities, which... is struggling to deliver’.

‘Regulatory headwinds mean United Utilities’ pledge to build the dividend at or in line with inflation could come under threat in the years ahead, especially if returns don’t improve.

However, major changes still look unlikely in the near-term, and with the yield up at 5.1%, the shares may still prove attractive to income-seeking investors.'

The shares fell 7p to 795.6p yesterday,

Key stats
Market capitalisation£2,580m
No. of shares out373m
No. of shares floating262m
No. of common shareholdersnot stated
No. of employees10205
Trading volume (10 day avg.)1m
Turnover£1,753m
Profit before tax£361m
Earnings per share36.53p
Cashflow per share68.56p
Cash per share23.72p

Slowdown expected at DMGT

Daily Mail publisher DMGT (DMGOa) has announced a strong first half but Numis warned revenues were expected to slow in the second half of the year.

Analyst Gareth Davies retained his ‘buy’ recommendation and target price of 905p on the stock after ‘a strong set of first-half results’ with ‘revenues as expected, but group operating profit and associated contribution were both well ahead of our estimates’.

‘Outlook and guidance for the full year remains unchanged,’ he said. ‘The group cautions that they expect slower revenue growth in the second half due to challenging conditions for advertising and property information, as well as timing factors.’

Davies added he was holding guidance because ‘at the very least, numbers feel fully underpinned’.

The shares fell 9.6% to 692p yesterday.

Key stats
Market capitalisation£580m
No. of shares out278m
No. of shares floating268m
No. of common shareholdersnot stated
No. of employees1388
Trading volume (10 day avg.)m
Turnover£245m
Profit before tax£35m
Earnings per share-20.49p
Cashflow per share-13.61p
Cash per share4.45p

Cyber security overload will drive NCC, says Jefferies

With cyber security high on the news agenda, consultant NCC’s (NCC) expertise is in more demand than ever, says Jefferies.

Analyst Ken Rumph reiterated his ‘buy’ recommendation and target price of 275p on the shares, which were trading at 208.6p yesterday.

‘A flood of GDPR emails, Facebook testimony, Cambridge Analytica - cyber security and privacy aren’t out of the news,’ he said.

‘Regulation drives business for product companies, and raises demand for the consultancy services NCC provides.’

Rumph also identified insurance and risk management as a ‘newer’ source of business and ‘distinct from the normal IT department sales channel’.

‘It brings new business opportunities - loss adjustment, forensic type work - where NCC’s status gives it prominence on panels of providers, and that in turn provides leads for the proactive work following incidents,’ he said.

Key stats
Market capitalisation£2,563m
No. of shares out849m
No. of shares floating754m
No. of common shareholdersnot stated
No. of employees171
Trading volume (10 day avg.)2m
Turnover£80m
Profit before tax£33m
Earnings per share-0.77p
Cashflow per share-7.93p
Cash per share3.37p

Peel Hunt upgrades Capital & Counties on demerger news

Peel Hunt has upgraded Capital & Counties (CAPC) after the property company announced plans for a demerger.

Analyst James Carswell upgraded his recommendation from ‘reduce’ to ‘hold’ and increased the target price from 250p to 300p. The shares rose 2% to 301.5p yesterday.

The company has two key assets - Earls Court and Covent Garden - and the demerger focuses on separating these assets into two companies.

‘Given the recent re-rating, a potential demerger of CapCo is unlikely to lead to a sharp rise in the near term share price but nonetheless we remain supportive of the plan, which will provide a floor to the price and could well increase the likelihood of an eventual sale of at least part of the company,’ said Carswell.

‘CapCo is targeting formalising the demerger by the year end. We upgrade to 'hold' and increase our target price to 300p with the shares currently trading on a 10% discount to net asset value.’

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  • Capital & Counties Properties PLC (CAPCC.L)
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  • Daily Mail and General Trust P L C (DMGOa.L)
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  • NCC Group PLC (NCCG.L)
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  • Provident Financial PLC (PFG.L)
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  • United Utilities Group PLC (UU.L)
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