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The Expert View: Sky, Melrose and GVC

Our daily roundup of analyst commentary on shares, also including Avon Rubber and GB Group.

by Michelle McGagh on Apr 04, 2018 at 05:00

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Key stats
Market capitalisation£22,708m
No. of shares out1,719m
No. of shares floating980m
No. of common shareholdersnot stated
No. of employees28123
Trading volume (10 day avg.)3m
Turnover£12,916m
Profit before tax£2,136m
Earnings per share39.97p
Cashflow per share95.63p
Cash per share145.43p

Liberum: Fox could make counter bid for Sky

Liberum believes Fox will come back with a revised bid for Sky (SKY) after Rupert Murdoch’s company proposed remedies to prevent competition concerns.

Analyst Ian Whittaker retained his ‘buy’ recommendation and target price of £12.50, the price offered by Comcast for Sky. Fox is aiming to stay in the running for Sky after stating that Sky News could be kept as an entirely separate entity or it could be sold to Disney, even if Disney's bid for Fox media assets falls through.

‘This should be enough to overcome the Competition and Markets Authority’s objections, especially as it was one of the three remedies suggested,’ said Whittaker.

‘Of more importance, is whether Fox/Disney will come back with a revised bid to match Comcast’s £12.50 cash offer – Fox’s bid was a £10.75 base.’

He said that ‘two factors point to a revised bid’, including a ‘coded message’ from Sky not to accept the Comcast bid yet as a sign that ‘there may be a counter-offer coming through from Fox’.

The shares rose 2.1% to £13.25 yesterday.

Key stats
Market capitalisation£2,373m
No. of shares out995m
No. of shares floating954m
No. of common shareholdersnot stated
No. of employees8707
Trading volume (10 day avg.)4m
Turnover£327m
Profit before tax£55m
Earnings per share0.73p
Cashflow per share2.29p
Cash per share7.08p

Melrose is a ‘must own’ after GKN takeover, says Peel Hunt

Engineering buyout specialist Melrose’s (MRON) takeover of GKN will enable value to be realised in the latter and makes the former a ‘must own’, says Peel Hunt.

Analyst Harry Philips retained his ‘buy’ recommendation and target price of 240p on the stock after Melrose took over 52% of the company in a ‘very hard fought battle’.

‘We…believe that Melrose will be a good owner of the business through investing and improving the asset base and delivering the value that long-standing GKN watchers, such as ourselves, believe is within the company,’ he said.

Philips added that he remained ‘slightly concerned’ about political interference but ‘a British company taking over another British one seems clear cut in our view’.

‘Melrose’s acquisition of GKN confirms our belief that Melrose is a must-own stock,’ he said.

The shares fell 2.7% to 224.9p yesterday.

Key stats
Market capitalisation£2,770m
No. of shares out304m
No. of shares floating285m
No. of common shareholdersnot stated
No. of employees2338
Trading volume (10 day avg.)11m
Turnover788m EUR
Profit before tax197m EUR
Earnings per share-0.07 EUR
Cashflow per share0.37 EUR
Cash per share0.89 EUR

Unknown GVC is not uninvestable, says Barclays

Regulation may be a storm cloud for online gambling company GVC Holdings (GVC) but Barclays says it does not make the company ‘uninvestable’.

Analyst Patrick Coffey retained his ‘overweight’ recommendation and increased the target price from £11.20 to £12.10. The shares fell 1.2% to 907.7p yesterday.

‘GVC is a unique collection of assets in a structurally growing industry,’ he said. ‘Having just acquired Ladbrokes Coral, over the next three years we think there is…upside to estimates driven by synergies…re-rating potential and…free US optionality.’

While he noted that ‘regulation risk hovers over the sector like a persistent storm cloud posed to strike unexpectedly’ that ‘does not make GVC uninvestable’.

Key stats
Market capitalisation£m
No. of shares out31m
No. of shares floating30m
No. of common shareholdersnot stated
No. of employees783
Trading volume (10 day avg.)m
Turnover£163m
Profit before tax£36m
Earnings per share70.22p
Cashflow per share113.33p
Cash per share85.42p

Avon Rubber sale gives M&A firepower, says Jefferies

Avon Rubber (AVON) has sold its subsidiary Avon Engineering Fabrications, which Jefferies says strategically ‘makes a lot of sense’ and increases the scope for mergers and acquisitions (M&A).

Analyst Andy Douglas reiterated his ‘buy’ recommendation and target price of £14.05 on the stock, which rose 2.4% to £13 yesterday.

‘Avon Rubber has announced the disposal of its Avon Engineering Fabrications business for $9.3 million,’ he said. ‘The future of this business has been up for debate for a while and strategically, makes a lot of sense. The disposal further increases management’s balance sheet firepower, which we expect to drive M&A over time.’

Douglas added that the sale was ‘a sensible tidying of the group’s portfolio’.

Key stats
Market capitalisation£m
No. of shares out153m
No. of shares floating144m
No. of common shareholdersnot stated
No. of employees660
Trading volume (10 day avg.)m
Turnover£87m
Profit before tax£26m
Earnings per share8.02p
Cashflow per share12.31p
Cash per share13.08p

Data rules bode well for GB Group

New data protection rules makes investment in identity data intelligence company GB Group (GBGP) a good bet, says Berenberg.

Analyst Edward James retained his ’buy’ recommendation and target price of 460p on the stock ahead of the EU’s General Data Protection Act taking effect on 25 May.

He said ‘investors are increasingly looking to gain exposure to the accelerating growth of the data security market’ and with ‘GB Group’s shares down c.10% since first-half results in November – despite being ahead of expectations – we view current levels as a compelling entry point into a company that is a direct beneficiary of this structural growth trend’.

James said if ‘organic momentum’ seen in first-half results carries through to the full-year there is ‘upside risk’ to full-year 2018 estimates and the new rules are expected to accelerate demand as the deadline approaches.

The shares fell 2p to 401.5p yesterday.

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  • Avon Rubber PLC (AVON.L)
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  • GB Group PLC (GBGP.L)
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  • GVC Holdings PLC (GVC.L)
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  • Melrose Industries PLC (MRON.L)
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  • Sky PLC (SKYB.L)
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