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The Expert View: Ted Baker, IP Group and RPC

Our daily roundup of analyst commentary on shares, also including Electrocomponents and Moneysupermarket.

by Michelle McGagh on Apr 03, 2018 at 05:00

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Key stats
Market capitalisation£1,113m
No. of shares out44m
No. of shares floating28m
No. of common shareholdersnot stated
No. of employees3166
Trading volume (10 day avg.)m
Turnover£592m
Profit before tax£99m
Earnings per share118.27p
Cashflow per share170.38p
Cash per share37.60p

Jefferies downgrades Ted Baker

Jefferies has downgraded designer Ted Baker (TED) as while analysts agree with plans to moderate growth, it impacts profit expectations across multiple years.

Analyst Niraj Amin downgraded his recommendation from ‘buy’ to ‘hold’ and reduced the target price from £30.00 to £27.00. The shares fell 4.4% to £24.98 on Thursday.

Amin believes the ‘historical sales momentum underpinning the equity story will prove more elusive in the near term’.

‘We believe Ted Baker’s strategy to moderate growth in a tough environment is the right thing to do to protect the long-term strength of the brand,’ he said.

‘However, with top line growth pared back and our three-year profit before tax growth expectations reduced from 16% to 13%, we lower our target multiple to 17x 2019 price/earnings ratio and downgrade to “hold”.’

Key stats
Market capitalisation£1,184m
No. of shares out1,057m
No. of shares floating972m
No. of common shareholdersnot stated
No. of employees70
Trading volume (10 day avg.)1m
Turnover£8m
Profit before tax£-9m
Earnings per share-2.39p
Cashflow per share-1.61p
Cash per share19.84p

Numis: scope for upside at IP Group

IP Group (IPO), an intellectual property company that acts as an incubator for start-ups, has had a ‘transformational’ year and Numis sees plenty of scope for upside.

Analyst Sally Taylor retained her ‘buy’ recommendation and target price of 180p on the stock after full-year results that showed net portfolio gains of 9% in 2017 and cash of £326.3 million, ‘which allows for significant flexibility and may benefit further from a renewed focus on realisations’. The shares jumped 4.1% to 111.8p on Thursday on the news.

‘With the shares trading at 0.85x net asset value, we see significant upside to our target price of 180p,’ she said.

Taylor added that the acquisition of technology commercialisation company Touchstone and a capital raise of £181 million last year was ‘transformational’ for IP.

‘The business benefits from critical mass, operations in three major territories, and a number of near-term inflection points,’ she said.

Key stats
Market capitalisation£3,184m
No. of shares out408m
No. of shares floating396m
No. of common shareholdersnot stated
No. of employees25000
Trading volume (10 day avg.)2m
Turnover£2,747m
Profit before tax£454m
Earnings per share36.80p
Cashflow per share82.58p
Cash per share62.21p

RPC can adapt to plastics shift, says Hargreaves Lansdown

An upbeat tone from plastics manufacturer RPC Group (RPC) should be enough to stymie fears about a push to reduce plastic use and Hargreaves Lansdown says the company will be able to respond to calls for more recyclable products.

RPC’s fourth quarter figures were ‘light on numbers’, said analyst Nicholas Hyett, but ‘the tone is certainly upbeat, and given the headwinds facing the plastic packaging industry at the moment that should be enough to put some fears to rest’.

‘The campaign to reduce plastic usage and waste has weighed on the shares in recent months – and it’s unlikely the group would escape a regulatory crackdown unscathed. However, as one of the largest packaging businesses in Europe, with a focus on innovation, it’s not all bad news,’ he said.

‘RPC should be able to respond quickly to demand for more easily recyclable products with minimal environmental impact.’The shares fell 5p to 781.8p on Thursday.

Key stats
Market capitalisation£2,650m
No. of shares out442m
No. of shares floating439m
No. of common shareholdersnot stated
No. of employees5769
Trading volume (10 day avg.)1m
Turnover£1,512m
Profit before tax£162m
Earnings per share20.76p
Cashflow per share27.34p
Cash per share21.19p

Peel Hunt upgrades ‘attractive’ Electrocomponents

Peel Hunt has upgraded Electrocomponents (ECM) as it believes the shares have ‘drifted a long way’ to an attractive price.

Analyst Henry Carver upgraded his recommendation from ‘hold’ to ‘add’ with a target price of 650p on the shares, which jumped 5% to 600p on Thursday.

‘The shares have drifted a long way since the highs of 709p back in November,’ he said. ‘We believe this now presents an attractive opportunity.

‘While we thought 700p was probably getting too rich at the end of last year, we do back this management team and stand by our medium-term thesis on revenue growth and margin recovery, and our target price of 650p.’

Key stats
Market capitalisation£1,536m
No. of shares out536m
No. of shares floating527m
No. of common shareholdersnot stated
No. of employees631
Trading volume (10 day avg.)3m
Turnover£330m
Profit before tax£125m
Earnings per share14.40p
Cashflow per share18.21p
Cash per share6.56p

Moneysupermarket’s clever Decision

Shore Capital is backing Moneysupermarket’s (MONY) acquisition of home communications and mobile phone comparison business Decision Technologies for £40 million.

Analyst Roddy Davidson retained his ‘buy’ recommendation on the shares, which rose 1.3% to 286.4p on Thursday.

Moneysupermarket said the deal would be ‘earnings accretive’ and hopes it would add impetus to the comparison site’s growth plans.

‘Decision Technologies seems a sensible acquisition for Moneysupermarket and we look forward to hearing more about its prospects, plans to integrate it into the group’s already comprehensive price comparison offering and the potential for it to act as a conduit for wider interaction with business customers,’ he said.

Davidson added that he was positive on the ‘structural growth prospects in price comparison activity and on Moneysupermarket’s ability to capitalise’.

‘Recent downgrades mean that the group’s growth profile looks less attractive than those of other online players and our broader media sector watchlist, making it more difficult to justify a premium rating…[it] looks fairly valued rather than cheap,’ he added.

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Look up the shares

  • Ted Baker PLC (TED.L)
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  • IP Group PLC (IPO.L)
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  • RPC Group PLC (RPC.L)
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  • Electrocomponents PLC (ECM.L)
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  • Moneysupermarket.Com Group PLC (MONY.L)
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