Citywire printed articles sponsored by:
View the rest of this gallery online at http://citywire.co.uk/money/gallery/a882149
The Expert View: Standard Chartered, Rolls-Royce and Imperial
Our daily roundup of analyst commentary on shares, also including Tate & Lyle and Acal.
by Sam Antrobus on Feb 15, 2016 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.
Standard Chartered – too cheap to turn down?
Investec believes that while Standard Chartered (STAN) faces a difficult future, the current share price presents an opportunity that is too good to turn down.
Analyst Ian Gordon upgraded his recommendation from ‘hold’ to ‘buy', with a target price of 460p on the shares, which rose 8.2% to 418.2p on Friday.
‘Given the way 2016 has played out so far, we think it is little surprise that Standard Chartered has been [almost] the worst performing UK bank year-to-date,’ he said.
‘Aside from its disproportionate [$43.2 billion] commodities-related exposure, with adverse implications for revenues and impairments, the blow-out in credit default swap spreads and yields for additional tier one securities has implications for its intended $4 billion of further additional tier one issuance.
‘We believe that Standard Chartered’s path back to “normalised” returns remains long and deeply uncertain,’ he said, but argued that with the bank trading at 0.4% book value, its lowest level this century, now was the time to ‘buy’.
Rolls-Royce dividend cut could mark a turning point
Rolls-Royce (RR) has implemented a painful 50% dividend cut, but Jefferies believes the aircraft engine manufacturer has ‘stopped the rot’.
Analyst Sandy Morris offered a ‘buy’ recommendation, with a target price of 700p on the shares, which jumped 17.2% to 621.1p yesterday amid relief the company was not forced into a sixth profit warning in two years.
‘The 50% cut in the final dividend is a painful step, but Rolls-Royce makes a fairly clear commitment to a progressive dividend policy, in our view,’ he said.
‘If sentiment stabilises and a more rounded approach to gauging the Rolls-Royce equity story is adopted, we believe it will bring cash flows into focus. Rolls-Royce has stated that cash flows are the best way of valuing civil aerospace – and we agree.
‘The story is simple – rapid growth in the installed engine fleet generates corresponding strong growth in aftermarket revenues, but expenditure on engine overhauls initially grows far more slowly.’
Imperial Brands’ overhaul spells optimism moving forward
Imperial Brands’ (IMB) decision to drop ‘tobacco’ from its name spearheads the wider positive change that the company is currently implementing, according to Deutsche Bank.
Analyst Gerry Gallagher maintained a ‘buy’ recommendation, with a target price of £41.10 on the shares, which fell 0.8% to £35.60 on Friday.
‘The extent to which CEO [Alison] Cooper has and will likely continue to transform Imperial internally and away from external eyes should not be underestimated. The journey from a cost-focused “M&A house that happens to sell cigarettes” to a business focused on top-line sustainability with positive valuation implications has, at times, been very difficult,’ he says.
‘Nevertheless, CEO Cooper retains the transformational goals with the name change the most public manifestation: as CEO Cooper once noted, until recently Imperial saw itself as a tobacco manufacturer with notions of consumers and brands secondary to costs.
‘That has changed; the potential upside from a 14.6% price-to-earnings ratio should not be underestimated in our view.’
Liberum: Tate & Lyle ‘turning the corner’
Liberum analyst Robert Waldschmidt feels the recent sell-off in Tate & Lyle (TATE) has been unwarranted and believes the company is back on track, despite softer demand in the Americas.
He maintained a ‘buy’ recommendation, with a target price of 700p on the shares, which fell 0.8% to 535.5p on Friday.
‘In our view, Tate & Lyle is turning the corner on its recent woes and is on track to execute a sustained recovery,’ he said.
‘We expect 2016 will prove an inflection point and forecast an 11% rebound in 2017 pre-tax profits as one-off items drop out and new speciality food ingredients plant capacity comes online.
‘In our view, Tate & Lyle’s historical difficulties are grounded in execution and strategic ambition, areas that management is addressing.’
Acal remain strong on all fronts
Strong acquisition performance is helping customised electronics supplier Acal (ACL) ride out global macroeconomic concerns.
Peel Hunt analyst Henry Carver upgraded his recommendation from ‘add’ to ‘buy’ with a target price of 315p on the shares, which fell 1% to 247p on Friday.
‘Acal’s Q3 interim management statement is reassuring both on underlying trading and on acquisitions. The small acquisition of Piltron in Toronto provides a foothold in the US, from which Acal can continue to expand into North America,’ he said.
‘The interim management statement confirms trading in line with expectations, with overall trends largely unchanged from those seen at the time of the Interims in November. This implies underlying growth at 2%.
‘The general macro-environment backdrop is uncertain but Acal is showing good levels of resilience… we expect more to come.’
More about this:
Look up the shares
- Standard Chartered PLC (STAN.L)
- Rolls-Royce Holdings PLC (RR.L)
- Imperial Brands PLC (IMB.L)
- Acal PLC (ACL.L)
- Tate & Lyle PLC (TATE.L)