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The Expert View: Schroders, Go-Ahead and Britvic

Our daily roundup of analyst commentary on shares, also including Keywords Studios and B&M.

by Michelle McGagh on May 31, 2018 at 05:00

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Key stats
Market capitalisation£9,200m
No. of shares out283m
No. of shares floating174m
No. of common shareholdersnot stated
No. of employees4013
Trading volume (10 day avg.)m
Turnover£2,512m
Profit before tax£777m
Earnings per share211.46p
Cashflow per share234.01p
Cash per share1,232.58p

Hargreaves’ Clayton buys Schroders

Hargreaves Lansdown fund manager Steve Clayton has taken a position in Schroders (SDR) in his HL Select UK Growth Shares fund, pointing to the fund group’s conservative balance sheet and high levels of cash.

Clayton said Schroders benefited from ‘a sensible management team, significant scale, a deep product set, strong brand, and powerful distribution network’.

‘We believe a key factor behind the group’s success is its culture,’ said Clayton. ‘The Schroder family own 48%... this family influence means the business is very conservatively financed, with no long term debt and plenty of surplus capital to deploy into bolt-on acquisitions and new growth initiatives.’

Key stats
Market capitalisation£751m
No. of shares out43m
No. of shares floating39m
No. of common shareholdersnot stated
No. of employees29000
Trading volume (10 day avg.)m
Turnover£3,481m
Profit before tax£218m
Earnings per share207.09p
Cashflow per share418.37p
Cash per share1,370.12p

Liberum: ‘misplaced optimism’ at Go-Ahead

Liberum has downgraded Go-Ahead (GOG) on the lack of catalysts for upside but has noted improved performance at the train and bus operator.

Analyst Gerald Khoo downgraded his recommendation form ‘buy’ to ‘hold’ but increased the target price from £18.10 to £18.90. The shares slumped 5.5% to £17.40 yesterday.

Khoo increased his short-term forecasts ‘to reflect the better performance at Southeastern’ although said in later years ‘this is increasingly offset by more cautious assumptions’ on the regional bus division.

‘Our previous optimism appears misplaced, with few signs of a revenue recovery,’ he said. ‘Although the regional bus performance is disappointing, we believe the underlying performance may be even worse, given a weak comparative.’

He raised his target price but said ‘with insufficient upside potential and no obvious material catalysts, we downgrade our recommendation’.

Key stats
Market capitalisation£2,131m
No. of shares out264m
No. of shares floating260m
No. of common shareholdersnot stated
No. of employees4848
Trading volume (10 day avg.)1m
Turnover£1,431m
Profit before tax£255m
Earnings per share42.23p
Cashflow per share64.66p
Cash per share31.27p

Well-positioned Britvic not immune from problems, says Jefferies

The outlook for soft drink manufacturer Britvic (BVIC) is looking ‘favourable’ but Jefferies warns that questions around packaging could hold back multiple expansion.

Analyst Edward Mundy retained his ‘hold’ recommendation and increased the target price from 750p to 850p. The shares edged 2p higher to 806p yesterday.

He said the ‘strong’ first-half delivery and positive reaction from customers to the sugar tax ‘leaves the company well positioned for the second half’.

‘We increased full-year 2019 earnings by 2% to reflect stronger full-year 2018 momentum and the cycling of the bad debt write-off in 2019,’ he said.

‘Medium term, we see a favourable outlook with profits underpinned by cost savings, however, uncertainty from a deposit return scheme could hold back significant further multiple expansion.’

Key stats
Market capitalisation£1,076m
No. of shares out63m
No. of shares floating55m
No. of common shareholdersnot stated
No. of employees3167
Trading volume (10 day avg.)m
Turnover132m EUR
Profit before tax22m EUR
Earnings per share0.10 EUR
Cashflow per share0.19 EUR
Cash per share0.43 EUR

Peel Hunt backs latest Keywords acquisition

Keyword Studios (KWS), which offers outsourced services to the video games industry, has made another acquisition, which shows the depth of its reach, says Peel Hunt.

Analyst Ashu Sony retained his ‘add’ recommendation and increased the target price from £18.50 to £19.00 after it acquired games agency Fire Without Smoke for £5.2 million. The shares fell 10p to £17.08 yesterday.

Sony said the acquisition provided more opportunity to work with games publishers and ‘early stage creative marketing strategies’ and was expected to contribute £700,000 to profit before tax in the next 12 months.

‘We highlight that the opportunity presented itself through an existing relationship with Keywords, showcasing the depth of its reach across the video games landscape,’ he said.

Key stats
Market capitalisation£3,906m
No. of shares out1,001m
No. of shares floating800m
No. of common shareholdersnot stated
No. of employees26057
Trading volume (10 day avg.)3m
Turnover£2,431m
Profit before tax£238m
Earnings per share14.29p
Cashflow per share17.00p
Cash per share15.60p

Numis: buy into B&M growth story

Discount retailer B&M (BMEB) is trading at a discount to peers and as the shares have slipped back, Numis is flagging a buying opportunity.

Analyst Andrew Wade retained his ‘add’ recommendation and target price of 450p on the stock after full year results that showed profit before tax up 16.5% at £221.5 million, which Wade said ‘reflects a clear execution of the group’s growth strategy’. The shares jumped 4.9% to 391.3p yesterday.

He said the stock was trading on ‘a clear discount to its European peer group of growth retailers, despite a more rapid expansion profile’.

‘With the shares having slipped back in recent months, we see this as an attractive valuation for a consistent compounding growth story and a business clearly benefiting from the structural challenges facing retail category specialists,’ said wade.

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  • Schroders PLC (SDR.L)
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  • Go-Ahead Group PLC (GOG.L)
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  • Britvic PLC (BVIC.L)
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  • Keywords Studios PLC (KWS.L)
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  • B&M European Value Retail SA (BMEB.L)
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