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The Expert View: Thomas Cook, Bellway and John Laing
Our daily roundup of analyst commentary on shares, also including 888 and Johnston Press.
by Michelle McGagh on Mar 23, 2016 at 05:00
Thomas Cook is still a ‘buy’
Geopolitical events have raised some concerns for Thomas Cook (TCG) but the travel operator is still a ‘buy’.
Shore Capital analyst Greg Johnson reiterated his ‘buy’ recommendation but does not have a target price for the stock following a trading update. The shares fell 4.3% to 88.6p yesterday after the terror attacks in Brussels.
‘The winter programme is 90% sold and the summer 40% sold…reflecting slower books due to the well-publicised geopolitical events and capacity reduction,’ he said.
‘The UK and north European regions remain robust, but continental Europe, particularly Germany, remains soft.
‘We understand the group is delivering on its strategy to reposition on the western Mediterranean with bookings, pricing and margins robust. The statement points to management retaining guidance, we understand this to be around £340 million of operating profit, although it depends upon delivery of a later booking profile.
‘Overall, trading conditions remain consistent with that reported with the Q1 results five weeks ago. We reiterate our 2016 profit before tax of £207 million and our “buy” stance although we appreciate the uncertainty around geopolitical events on forecasts.’
Results from 888 shows ‘rude health’
Full-year results for gaming group 888 Holdings (888) have come in ahead of expectations.
Peel Hunt analyst Ali Naqvi retained his ‘add’ recommendation and target price of 187p on the shares, which rose 3.6% to 188p yesterday.
‘True to form 888 came in ahead of expectations and a strong start to the year gives us confidence to nudge current year numbers higher,’ he said.
‘888 management continue to get the most out of a high quality suite of products and an effective backend. The combination of an undemanding rating and c.6% yield suggest the shares have further to run.’
He added that 888 ‘may have been thwarted in its mergers and acquisitions ambitions but these results show that the business remains in rude health’.
Undervalued Bellway reports strong results
Housebuilder Bellway (BWY) has reported half-year results that show a strong order book and the ability to carry momentum forward.
Numis analyst Chris Millington retained his ‘add’ recommendation and target price of £28.60 on the shares, which rose 3.3% to £25.54 yesterday.
‘Bellway has delivered a very strong H1 performance with profit before tax growth of 43%, which alongside the strength of the margin in the forward order book and strong current trading has prompted Numis to upgrade 2016 and 2017 estimates by 6% and 10% respectively,’ he said.
‘Despite this continued earnings momentum and Bellway’s top-quartile returns, the company is trading at a 23% discount to sector.’
He added: ‘We do not think the inherent conservativeness of management or the fact that the group is earning high return on tangible common equity versus peers – while running a conservative balance sheet with regard to average debt and land creditors - is factored into the valuation.’
John Laing discount unwarranted
Infrastructure developer John Laing (JLG) has had a strong 2015 and the 2016 pipeline is looking equally positive.
Barclays analyst Daniel Garrod reiterated his ‘overweight’ recommendation and increased the target price from 240p to 270p. The shares dipped 2p to 227.3p yesterday.
‘John Laing performed well in 2015, reporting December net asset value of £890 million…up 15% year-on-year,’ he said.
‘Portfolio valuation was up 22% year-on-year to £841 million, driven by fair value movements of £132 million. The largest components of this were the unwinding of project discount rates and value enhancements. Management project a confident outlook for 2016 stating that the year has started well with an increase in investment pipeline to £1.5 billion.
‘We raised our projected 2016 estimated net asset value by 4% to 267p and highlight that the continuing discount to net asset value appears unwarranted.’
Johnston Press acquires ‘i’ newspaper
Publisher Johnston Press (JPR) has acquired the ‘i’ newspaper for £24 million, which will provide benefits for the company.
Liberum analyst Ian Whittaker retained his ‘buy’ recommendation and increased the target price from 120p to 195p. The shares jumped 15.9% to 47.5p yesterday.
‘Johnston Press’s £24 million acquisition of the UK national daily newspaper ‘i’ got shareholder approval at [the] AGM,’ he said. ‘We increase our full year 2016/17 EBITDA estimates on the back of this transformational acquisition which comes with numerous other benefits. We also adjust our model for the lower pension deficit and net debt, as a consequence we raise our… target price to 195p.’
Whittaker said the additional benefits included ‘attractive earning profile, new blue-chip advertising clients, [ability to] drive digital audiences and revenues, strengthen national news portfolio, exposure to ABC1 demographics’.
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Look up the shares
- Thomas Cook Group plc (TCG.L)
- Johnston Press PLC (JPR.L)
- 888 Holdings PLC (888.L)
- Bellway PLC (BWY.L)
- John Laing Group PLC (JLG.L)