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The Expert View: Whitbread, St James’s Place and Virgin Money

Our daily roundup of analyst commentary on shares, also including CityFibre and Gemfields.

by Michelle McGagh on Apr 26, 2017 at 05:01

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.
Key stats
Market capitalisation£7,303m
No. of shares out183m
No. of shares floating181m
No. of common shareholdersnot stated
No. of employees41175
Trading volume (10 day avg.)1m
Turnover£2,922m
Profit before tax£391m
Earnings per share214.00p
Cashflow per share319.97p
Cash per share31.27p

Buy cheap Whitbread, says Credit Suisse

Costa and Premier Inn owner Whitbread (WTB) is trading at a cheap price compared to its historic average despite the investment case being on track, says Credit Suisse.

Analyst Tim Ramskill retained his ‘outperform’ recommendation and target price of £45.50 on the stock following full-year 2017 results.

It reported profit before tax of £565 million against Ramskill’s estimate of £570 million, and guidance for 2018 and the £150 million self-help plan are ‘on track’.

But the shares fell 6.6% to £40.25 yesterday as investors took fright at falling sales at Costa and chief executive Alison Brittain’s warning of a ‘tougher consumer environment than last year’.

‘We maintain a positive view on Whitbread given solid results, trading momentum and a reasonable valuation,’ said Ramskill.

‘We note Whitbread is cheap versus history, trading at a c.5% premium to the FTSE 250 versus a 20% premium over the last 10 years. Whitbread trades on a February 2018 estimate price earnings of 16.1x offering an adjusted free cashflow yield of 4.7%.’

Key stats
Market capitalisation£5,873m
No. of shares out528m
No. of shares floating490m
No. of common shareholdersnot stated
No. of employees1735
Trading volume (10 day avg.)2m
Turnover£11,355m
Profit before tax£112m
Earnings per share21.34p
Cashflow per share23.33p
Cash per share65.58p

Numis: SJP set for ‘significant’ growth this year

Numis believes this will be the year St James’s Place (SJP) sees higher growth as infrastructure spending comes to an end.

Analyst David McCann retained his ‘add’ recommendation and target price of £12.00 on the stock after Q1 results. The stock gained 5.4p to close 0.5% up at £11.20.

‘We recognise that after several years of only small growth in the overall cash result, this year we are forecasting a significant increase,’ he said. ‘This reflects high recent infrastructure and operating expense growth which now appears to be levelling off...we think the market will react positively when it sees such growth being reported and that this should continue to feed through into significant increases in the dividend.’

Longer term, McCann said he held the company ‘in very high regard’ and believed ‘it should continue to be a core long term sector holding for many investors’.

Key stats
Market capitalisation£1,479m
No. of shares out455m
No. of shares floating282m
No. of common shareholdersnot stated
No. of employees2394
Trading volume (10 day avg.)2m
Turnover£948m
Profit before tax£130m
Earnings per share29.05p
Cashflow per share34.88p
Cash per share319.57p

Virgin Money alleviates Jefferies’ credit concerns

Virgin Money (VM) has placated Jefferies’ concerns about unsecured lending, stating that customers were showing no signs of strain.

Analyst Kapilan Pillai retained his ‘buy’ recommendation and target price of 430p on the stock, which added 2.3p to close 0.7% higher at 325.4p.

‘With elevated concerns over unsecured lending, Virgin Money has delivered a reassuring message that credit has not turned yet in the first quarter, with card arrears improving modestly year-to-date and customers currently showing no signs of strain,’ he said.

‘The recent Financial Conduct Authority proposals to address persistent debt are also expected to have an immaterial impact given Virgin Money’s prime credit card book.’

He added that Virgin Money’s existing market guidance was reaffirmed.

Key stats
Market capitalisation£147m
No. of shares out266m
No. of shares floating248m
No. of common shareholdersnot stated
No. of employees131
Trading volume (10 day avg.)m
Turnover£6m
Profit before tax£-6m
Earnings per share-6.02p
Cashflow per share-4.19p
Cash per share9.21p

CityFibre poised for fast growth, says Liberum

Digital infrastructure provider CityFibre (CITY) is benefiting from regulatory changes and a rising demand for high speed internet, according to Liberum.

Analyst Janardan Menon retained his ‘buy’ recommendation and target price of 138p on the stock, which softened 0.5p to close 0.9% lower at 55.5p on Tuesday.

He said the 2016 results were in line with forecasts, with revenues rising 140% year-on-year to £15.4 million.

‘With a significant network presence in 42 cities and initial contract value of £75 million added last year, CityFibre is well positioned to continue to grow its revenues and earnings rapidly in the coming year,’ he said.

‘Regulatory changes are blowing in CityFibre’s favour, alongside rising demand for high speed fibre-based connectivity,’ he added.

Key stats
Market capitalisation£229m
No. of shares out544m
No. of shares floating38m
No. of common shareholdersnot stated
No. of employees2064
Trading volume (10 day avg.)2m
Turnover151m USD
Profit before tax9m USD
Earnings per share0.02 USD
Cashflow per share0.07 USD
Cash per share0.06 USD

Gemfields: short-term blip is buying opportunity, says Peel Hunt

Coloured gem stone miner Gemfields (GEM) has been hit by reduced demand for emeralds but Peel Hunt believes this has created a buying opportunity.

Analyst Michael Stoner reiterated his ‘buy’ recommendation but reduced the target price from 93p to 83p. The softened 0.3% to 42.25p.

‘Gemfields has suffered weakening demand for its emeralds through the last six months, led by the Indian demonetisation policy,’ he said.

‘We view this as a temporary hurdle that creates an attractive buying opportunity ahead of a long-term growth profile.’

Although Stoner reiterated his ‘buy’, he said he moved ‘short-term revenue forecasts back significantly’ leading to a reduced target price.‘On less aggressive short-term growth expectations, we continue to see value and a route through funding the working capital build out over the next two to three years,’ he added.

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Look up the shares

  • Whitbread PLC (WTB.L)
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  • St. James's Place PLC (SJP.L)
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  • Virgin Money Holdings (UK) PLC (VM.L)
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  • CityFibre Infrastructure Holdings PLC (CITYC.L)
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  • Gemfields PLC (GEM.L)
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