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The Expert View: RBS, St James’s Place and Whitbread

Our daily roundup of analyst commentary on shares, also including Hargreaves Lansdown and Brooks Macdonald.

by Michelle McGagh on Jan 27, 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£27,736m
No. of shares out11,792m
No. of shares floating3,377m
No. of common shareholdersnot stated
No. of employees82500
Trading volume (10 day avg.)18m
Turnover£11,925m
Profit before tax£-3,520m
Earnings per share-30.57p
Cashflow per share-16.00p
Cash per share841.02p

RBS costs for US mis-selling ‘manageable’, says Jefferies

RBS (RBS) has set aside £3.1 billion in provisions for the cost of alleged US mortgage-backed securities mis-selling, which Jefferies believes will have a ‘manageable impact’ on the bank.

Analyst Joseph Dickerson retained his ‘hold’ recommendation and target price of 212p on the stock, which was trading up 2.8%, or 6.5p, at 234p at the time of writing.

The provision is expected to push the bank to its ninth consecutive annual loss.

‘The charge appears to cover a potential Department of Justice (DoJ) settlement and if this is the sum that the bank pays to settle with the DoJ, it would be well within market expectations,’ said Dickerson.

‘However, certainty on the DoJ charge will not be achieved until a settlement is announced.

‘Our fourth quarter 2016 estimates had already contemplated a $2 billion charge for DoJ residential mortgage-backed securities matters. The incremental $1.8 billion would represent 0.7% of [tier one capital] and 13p of total net asset value.’

Key stats
Market capitalisation£47,581m
No. of shares out700m
No. of shares floating630m
No. of common shareholdersnot stated
No. of employees34700
Trading volume (10 day avg.)1m
Turnover£8,874m
Profit before tax£1,743m
Earnings per share240.90p
Cashflow per share263.29p
Cash per share95.33p

Peel Hunt downgrades strengthening Brooks Macdonald

Peel Hunt has downgraded wealth manager Brooks Macdonald (BRK) after a strong run in the share price.

Analyst Stuart Duncan downgraded his recommendation from ‘buy’ to ‘add’ with a target price of £21.00 on the stock, which was trading down 0.9%, or 18.5p, at £19.94 at the time of writing.

A second quarter statement from the firm showed ‘strong organic growth being supplemented by rising markets over the period and overall trading in line with management’s expectations’, said Duncan.

‘[The] statement confirms that Brooks is delivering sector-leading growth, benefiting from the strategy of building strong relationships with introducing firms. However, after a strong run in the shares over the last month - +20% - we moderate our recommendation to “add”,’ he said.

Key stats
Market capitalisation£6,425m
No. of shares out474m
No. of shares floating241m
No. of common shareholdersnot stated
No. of employees969
Trading volume (10 day avg.)1m
Turnover£388m
Profit before tax£177m
Earnings per share37.26p
Cashflow per share38.44p
Cash per share44.11p

Hargreaves’ new finance boss a good pick

Online stockbroker Hargreaves Lansdown (HRGV) has announced its new chief financial officer, which Shore Capital said is a ‘solid appointment’.

Analyst Paul McGinnis retained his ‘buy’ recommendation on the stock and a ‘fair value’ of £15.00. Shares were trading up 1.1%, or 15p, at £13.46 at the time of writing.

The company has recruited Philip Johnson, former chief financial officer at fund group Jupiter, as current finance boss Chris Hill prepares to take over from Ian Gorham as chief executive.

‘We view Johnson, well-known in the market from his time as chief financial officer at Jupiter Fund Management, as a very solid appointment meaning the whole process has been handled very smoothly,’ said McGinnis.

He added that equity markets in the fourth quarter were expected to be ‘supportive of Hargreaves’ interim results’.

The shares are trading on ‘high near term multiples’ which are ‘fully justified’, said McGinnis.

‘We expect [multiples] to drop rapidly in the medium term though continued double-digit growth in Vantage assets under administration and building from zero in the cash savings markets,’ he said.

Key stats
Market capitalisation£5,731m
No. of shares out527m
No. of shares floating489m
No. of common shareholdersnot stated
No. of employees1430
Trading volume (10 day avg.)1m
Turnover£3,113m
Profit before tax£202m
Earnings per share38.57p
Cashflow per share40.26p
Cash per share1,014.95p

Numis downgrades St James’s Place on share price rises

Numis has downgraded St James’s Place (SJP) as the shares trade near ‘peak metrics’ but the financial advice group will continue to grow and gather assets.

Analyst David McCann downgraded his recommendation from ‘add’ to ‘hold’ with a target price of £10.65 after fourth quarter results from the group. Shares were trading up 2.5%, or 28p, at £11.21 at the time of writing.

St James’s Place reported funds under management at £75 billion and net inflows of £2.1 billion in the fourth quarter, beating expectations.

‘Following the strong recent share price appreciation - which has now gone through our target price, pre-marking to market - and with the shares now trading at or near peak metrics on current year numbers, our recommendation moderates from “add” to “hold”,’ said McCann.

‘We continue to believe that the business will demonstrate that it is one of the most consistent and resilient asset gatherers, and retainers, regardless of the economic conditions. In our view, the shares now fairly reflect this outlook.’

Key stats
Market capitalisation£7,088m
No. of shares out183m
No. of shares floating181m
No. of common shareholdersnot stated
No. of employees41175
Trading volume (10 day avg.)1m
Turnover£2,922m
Profit before tax£391m
Earnings per share214.00p
Cashflow per share319.97p
Cash per share31.27p

Whitbread a good medium term investment, says Stifel

Costa Coffee owner Whitbread (WTB) has reported a strong third quarter on the back of growth at the coffee chain, and the company is still a good medium term investment, says Stifel.

Analyst Jeffrey Harwood retained his ‘buy’ recommendation and target price of £39.00 on the stock. It wasn’t all good news for the company, which also owns Premier Inn, as while Costa sales may have been up, it lost ground in its restaurants division.

At the time of writing, the shares were down 4.9%, or 201p, at £38.58.

‘Since the period end, trading in December was strong in the hotel sector and Whitbread is on track to deliver full-year results in line with expectations,’ he said.

‘This is an encouraging update, with a strong performance from Costa. The shares have performed well in recent weeks but we continue to regard Whitbread a good medium term investment with the prospect for high single-digit earnings growth.’

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  • Royal Bank of Scotland Group PLC (RBS.L)
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  • St. James's Place PLC (SJP.L)
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  • Whitbread PLC (WTB.L)
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  • Hargreaves Lansdown PLC (HRGV.L)
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  • Brooks Macdonald Group PLC (BRK.L)
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