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The Expert View: SSE, Boohoo and CRH

Our daily roundup of analyst commentary on shares, also including Rathbones and Carnival.

by Michelle McGagh on Apr 10, 2018 at 05:00

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Key stats
Market capitalisation£13,186m
No. of shares out1,015m
No. of shares floating1,010m
No. of common shareholdersnot stated
No. of employees21157
Trading volume (10 day avg.)4m
Turnover£29,038m
Profit before tax£2,907m
Earnings per share158.19p
Cashflow per share282.25p
Cash per share140.51p

Jefferies: ‘Attractive value’ at SSE

The market’s pessimism around energy supplier SSE (SSE) is not warranted and the business offers ‘attractive value’, says Jefferies.

Analyst Ahmed Farman retained his ‘buy’ recommendation and target price of £15.00 on the stock, which edged 3p higher to £13 yesterday.

‘The current nil premium to regulated asset value suggests to us that market pessimism on the outlook for SSE’s network businesses has gone too far,’ he said.

‘Even with lower returns in [Ofgem’s price controls], SSE’s core businesses currently offer attractive value, with a sustainable 6.4%-7.2% yield. Longer term, we see scope for management to offset the [Ofgem rule’s] earnings hit through cost-cutting, as well as new renewable projected.’

He added that the ‘balance sheet fears [are] overdone’ and ‘we continue to see strong strategic rationale for the retail spinoff and merger with Npower’.

Key stats
Market capitalisation£1,695m
No. of shares out1,149m
No. of shares floating714m
No. of common shareholdersnot stated
No. of employees1301
Trading volume (10 day avg.)10m
Turnover£295m
Profit before tax£35m
Earnings per share2.16p
Cashflow per share2.59p
Cash per share6.26p

Boohoo fears overdone, says Barclays

The sell-off in Boohoo (BOOH) shares has gone too far and Barclays believes the online fashion retailer can deliver over the mid-term.

Analyst Andrew Ross retained his ‘overweight’ recommendation but lowered his target price from 250p to 225p. The shares rose 1.4% to 147.5p yesterday.

Ross said Bohoo had been an underperformer since September last year as ‘debate has shifted to questions on mid-term margin sustainability’.

‘Concerns have been elevated by the unhelpful signalling of management and relatives selling shares after each of the last three results,’ he said. ‘Investors fear more concerning cost headwinds under the bonnet.’

Although Ross did not dispute there were ‘real headwinds’ he said ‘on the balance of probability, we think Boohoo can deliver on margin expectation two to three years out’.

Now is the time to look at CRH, says Numis

Numis believes now is the time to look at shares in building material manufacturer CRH (CRH) as they have fallen 15% since the beginning of last year.

Analyst Christen Hjorth reiterated his ‘add’ recommendation and target price of £28.70 on the shares, which edged a penny lower to £24.03 yesterday.

‘With CRH’s share price down 15% since the start of 2017, we believe that it is an opportune time to re-examine the group’s investment case,’ he said.

‘Construction activity in CRH’s key markets and the group’s returns remain below long-run averages. Furthermore, we see a number of see a number of potential short-term catalysts that could lead to share price upside over the next 12 months.’

Key stats
Market capitalisation£1,250m
No. of shares out51m
No. of shares floating46m
No. of common shareholdersnot stated
No. of employees1123
Trading volume (10 day avg.)m
Turnover£316m
Profit before tax£101m
Earnings per share91.88p
Cashflow per share129.97p
Cash per share2,680.95p

Rathbones acquisition talks ‘interesting’, says Peel Hunt

Wealth manager Rathbone Brothers (RAT) has confirmed it is in talks to acquire stockbroker Speirs & Jeffrey, which Peel Hunt said would be ‘interesting’ as it would boost the scale of the business.

Analyst Stuart Duncan retained his ‘add’ recommendation and target price of £28.00 on the shares, which jumped 1.7% to £24.14 yesterday.

The talks follow shelved acquisition discussions with Smith & Williamson and have ‘the potential to be an interesting deal for Rathbones’ according to Duncan.

‘Unlike Smith & Williamson, the smaller number of key individuals with Speirs & Jeffrey should make discussions rather more straightforward,’ he said.

‘The attraction of any deal is the greater scale achieved, with Rathbones already having the infrastructure and platform to support a larger business.’

Key stats
Market capitalisation£32,947m
No. of shares out715m
No. of shares floating180m
No. of common shareholdersnot stated
No. of employees97000
Trading volume (10 day avg.)1m
Turnover12,427m USD
Profit before tax3,090m USD
Earnings per share2.55 USD
Cashflow per share4.36 USD
Cash per share0.39 USD

Cashflow key to the Carnival party

Cruise ship operator Carnival (CCL) is benefiting from an uptick in demand which has boosted its cashflow and the chance of further dividend hikes, says The Share Centre.

Analyst Ian Forrest retained his ‘buy’ recommendation on the stock for ‘those willing to accept a medium level of risk and seeking a mixture of income and growth’.

He said cruises were becoming increasingly popular and Carnival was in ‘a strong position to reap the rewards’. ‘Investors should note the shares have outperformed market competitors over the past year, now trading on a 2019 price/earnings of 12.7x; the dividend yield too outpaces peers at 3.1%,’ said Forrest.

‘Further increasing Carnival’s attraction for investors is the strong cashflow which has enabled the group to raise dividends swiftly and support a share repurchase scheme.’

The shares fell 11p to £46.13 yesterday.

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  • Boohoo.Com PLC (BOOH.L)
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  • Carnival PLC (CCL.L)
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  • CRH PLC (CRH.L)
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  • Rathbone Brothers PLC (RAT.L)
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  • SSE PLC (SSE.L)
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