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The Expert View: WH Smith, Weir and Aegis

A round-up of analyst notes, including their take on Hunting and Max Petroleum.

by Harry Brooks on Jan 26, 2012 at 05:01

We’ve rounded up some of the best comment from top analysts to give you their views on WH Smith, Weir, Aegis, Hunting and Max Petroleum.

Key stats
Market capitalisation£766.09m
No. of shares out138.28m
No. of shares floating130.01m
No. of common shareholdersnot stated
No. of employees16,273
Trading volume (10 day avg.)0.251m
Profit before tax£73.00m
Earnings per share51.41p
Cashflow per share76.76p
Cash per share29.50p

*Correct as at 25 Jan 2012

Prime Markets backs 'evergreen' WH Smith as sales meet expectations

Richard Curr, head of dealing at Prime Markets, has put a 'buy' recommendation on retailer WH Smith (SMWH.L) following a company statement that showed trading was in line with expectations.

In the 21 weeks to 21 January like-for-like (LFL) sales declined 5%. However, gross margin improved over the period, and costs were tightly managed, according to the statement. The company's chief executive, Kate Swann, said that over the period WH Smith put in 'a resilient performance in challenging trading conditions'.

Curr praised the 'inexorable rise' of the 'evergreen' company's share price over the past year, and commended the company's continuing attempts to diversify against a backdrop of a tough domestic market. 'Smiths looks very well placed to continue to deliver growth and value for shareholders in a challenging marketplace,' he said, adding that he expects shares in the company to return to top their year highs in short order.

The analyst did acknowledge, however, that the company's share buyback programme has supported the price over the past year. Since 24 January the company has bought back 2.7 million shares an average price of £5.15.

Shares in WH Smith closed up 22p to hit 554p on Wednesday.

Key stats
Market capitalisation£4,187m
No. of shares out211m
No. of shares floating209m
No. of common shareholdersnot stated
No. of employees11789
Trading volume (10 day avg.)2m
Profit before tax£199m
Earnings per share93.24p
Cashflow per share117.97p
Cash per share39.87p

*Correct as at 25 Jan 2012

Investec says Weir's Novatech acquisition is 'a good fit'

Chris Dyett, analyst at Investec Securities, has kept his 'buy' recommendation on engineering group Weir (WEIR.L) following news that it has bought Novatech, a US-based maker of pumps and valves for use in the oil and gas industry, for £113 million.

In the company's statement on the acquisition, the group's chief executive noted that the acquisition would increase Weir's offering in the fast-growing US unconventional oil and gas market. Dyett seemed to agree with this assessment, describing the acquisition as a 'sensible fit' that would tap into rising exploitation of shale gas and oil.

Weir's full-year results are due to be released on 29 February, following which Dyett said he expects 'small upgrades' for the group.

Shares in Weir closed up 37p to hit £19.64 on Wednesday.

Weir is a Citywire Top Stock held by Nigel Thomas in his AXA Framlington UK Select Opportunities fund and Edward Legget in his Standard Life Inv UK Equity Unconstrained fund.

Key stats
Market capitalisation£1,826m
No. of shares out1,171m
No. of shares floating777m
No. of common shareholdersnot stated
No. of employees16578
Trading volume (10 day avg.)3m
Profit before tax£18m
Earnings per share1.73p
Cashflow per share7.39p
Cash per share33.76p

*Correct as at 25 Jan 2012

Numis ups Aegis price target on General Motors contact win

Lorna Tilbian, analyst at Numis, has retained her 'buy' recommendation and increased her target price for media and marketing group Aegis (AGS.L) following the announcement that it has been chosen by US carmaking giant General Motors to act as its global media partner.

The multi-year contract has a projected annual spend of $3 billion, according to Aegis's statement, and will cover all three of the company's operating regions: Europe, the Middle East and Africa; the Americas; and Asia Pacific.

Tilbian said the win has significant ramifications for the group's US unit: 'Operationally we believe this marks a step-change in the global standing of Aegis' US division, where new business momentum has been steadily building.' The contract means that Tilbian now forecasts organic growth at the group to rise by 6.5% this year, up from 3.5% previously.

'On higher forecasts our target price is raised from 191p to 203p. We agree with management that this account win marks a 'defining moment' for Aegis,' Tilbian said.

Shares in Aegis closed up 1.8p to hit 154.9p on Wednesday.

Key stats
Market capitalisation£1,163m
No. of shares out145m
No. of shares floating118m
No. of common shareholdersnot stated
No. of employees2036
Trading volume (10 day avg.)0m
Profit before tax£21m
Earnings per share15.37p
Cashflow per share38.51p
Cash per share206.16p

*Correct as at 25 Jan 2012

Liberum downgrades Hunting to 'sell' on weak US gas outlook

Andrew Whittock, analyst at Liberum Capital, has downgraded oil services firm Hunting (HTG.L) to 'sell' from 'hold' on fears that low gas prices in the US could have a negative knock-on effect on the company.

In a statement issued on Monday, Hunting revealed that trading has beaten earlier estimates, and that demand in the US continues to show strong momentum. However, Whittock believes this emphasis on US activity could be the company's weakness: 'We believe the price is ignoring uncertainty over US drilling activity and is too far ahead of events,' he said.

Although Whittock has upgraded his 2011 earnings-per-share forecast by 1.4p on the back of the update, he cautioned that without a higher level of onshore drilling activity in the US it is not clear that Hunting will be able to meet expectations. In the trading statement the company's management said they are 'comfortable' with the outlook for 2012.

Shares in Hunting closed down 37.5p to hit 792.5p on Wednesday.

Key stats
Market capitalisation£105m
No. of shares out1,012m
No. of shares floating671m
No. of common shareholdersnot stated
No. of employees155
Trading volume (10 day avg.)8m
Turnover36m USD
Profit before tax-12m USD
Earnings per share-0.02 USD
Cashflow per share-0.01 USD
Cash per share0.02 USD

*Correct as at 25 Jan 2012

Merchant Securities eyes upgrade for Max Petroleum as new Sagiz well kicks off

Brendan Long, analyst at Merchant Securities, has placed a 'buy' recommendation on Max Petroleum (MXP.L) following news that the company has started drilling the SAGW-3 appraisal well on the Sagiz West Field in Kazakhstan.

The well will be the second in the field, Long noted, after the first came up dry. Following the initial well's failure to locate commercially significant quantities of hydrocarbons, Long scaled back his price target for the group to his current level of 25.20p.

The field has been estimated to hold 4.8 million barrels of oil, and if SAGW-3, which will be drilled to a depth of around 1,400 metres, hits pay then Long's target price is likely to be upgraded.

Shares in Max Petroleum closed up 0.1p to hit 10.23p on Wednesday.

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  • Hunting PLC (HTG.L)
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  • Aegis Group PLC (AEGS.L)
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  • WH Smith PLC (SMWH.L)
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  • Weir Group PLC (WEIR.L)
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  • Max Petroleum PLC (MXP.L)
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