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The Expert View: William Hill, Ocado and Dixons Carphone

Our daily roundup of analyst commentary on shares, also including Babcock and Sage.

by Michelle McGagh on Jan 23, 2018 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.

Key stats
Market capitalisation£2,555m
No. of shares out858m
No. of shares floating855m
No. of common shareholdersnot stated
No. of employees16286
Trading volume (10 day avg.)5m
Profit before tax£336m
Earnings per share18.80p
Cashflow per share28.70p
Cash per share24.29p

William Hill hit by government crackdown fears

Shares in William Hill (WMH) tumbled yesterday after The Sunday Times reported the government was set to slash maximum stakes on controversial fixed odds betting terminals.

The shares closed 11.6% lower at 297.2p on the report, which claimed the government was set to cut the current £100 limit to just £2.

But The Share Centre stuck with its ‘buy’ rating on the news. ‘We continue to recommend William Hill as a ‘buy’ for investors due to the potential for further growth in mobile wagers, expansion into overseas markets and the prospect of further efficiencies within the business,’ said analyst Graham Spooner.

‘Obviously the potential for further regulatory changes, both in the UK and Australia, along with increased taxes remain concerns so we regard the stock as higher risk.’

Key stats
Market capitalisation£3,317m
No. of shares out631m
No. of shares floating420m
No. of common shareholdersnot stated
No. of employees10930
Trading volume (10 day avg.)2m
Profit before tax£84m
Earnings per share1.96p
Cashflow per share11.90p
Cash per share7.70p

Shore Capital left cold by Ocado’s new tie-up

Shares in Ocado (OCDO) surged yesterday on news of the online shopping group’s tie-up with Canadian supermarket Sobeys but Shore Capital is still concerned that the investment case is ‘superficial’.

Analyst Clive Black said while the announcement showed Ocado was broadening its reach, it had taken a long time to get there and more investment was required.

‘Ocado had a charmed life as an equity investment, one that we believe is still more superficial than real, one that still needs to be more relevant and substantial in the global grocery e-commerce world if it is to sustain elevated stock ratings,’ he said.

‘No double the market will warm to the broader customer base though and overlook the substance beneath the sheen leading us to suspect the stock to possibly be marked up further as, to be fair, long-standing evangelists have their day.’

Shares in Ocado raced 25% higher to 516.6p yesterday.

Key stats
Market capitalisation£2,326m
No. of shares out1,158m
No. of shares floating938m
No. of common shareholdersnot stated
No. of employees43883
Trading volume (10 day avg.)6m
Profit before tax£684m
Earnings per share25.20p
Cashflow per share41.30p
Cash per share12.75p

Hargreaves: challenges ahead at Dixons Carphone

Dixons Carphone (DC) has announced ‘impressive’ third quarter results but Hargreaves Lansdown warned there were still challenges to come for the mobile and electricals retailer.

Revenues for the period were up 4% on last year and sales growth was up 6%. The shares jumped 6.8% to 200.8p yesterday.

‘The all-important mobile market is changing rapidly and while initial signs are good, with strong growth in sim-free handset sales, margins are still struggling,’ said analyst Nicholas Hyett.

‘There’s also work to do in electricals. Dixons Carphone’s position as the last bricks and mortar electricals retailers standing does give it certain advantages, but margin pressure suggests the group still has work to do figuring out how it’s going to make the most of them.’

Key stats
Market capitalisation£8,793m
No. of shares out1,081m
No. of shares floating1,077m
No. of common shareholdersnot stated
No. of employees13795
Trading volume (10 day avg.)3m
Profit before tax£498m
Earnings per share23.71p
Cashflow per share29.06p
Cash per share21.35p

Jefferies looks ahead to Sage’s long-term outlook

Jefferies is looking ahead to the upcoming capital markets day at Sage (SGE) for a steer on the long-term outlook for the software maker.

Analyst Vijay Anand retained his ‘buy’ recommendation and target price of 915p ahead of the capital markets day on 25 January, which he said was ‘an important event for the investment case’. The shares were trading at 813.2p yesterday.

‘The recent full-year 2017 results signalled the end of the business model transformation,’ said Anand. ‘Therefore, at the capital markets day, we expect management to articulate the long-term financial outlook for the new Sage, along with its strategy to accelerate new customer wins with its cloud products.’

The company’s first quarter figures will be reported the day before and Anand expects ‘an in-line performance’.

Key stats
Market capitalisation£3,602m
No. of shares out506m
No. of shares floating497m
No. of common shareholdersnot stated
No. of employees35750
Trading volume (10 day avg.)2m
Profit before tax£443m
Earnings per share61.71p
Cashflow per share103.03p
Cash per share37.86p

Market fears over Babcock are overdone, says Numis

Shares in engineering support services company Babcock (BAB) have had a difficult couple of years but Numis believes market fears are ‘overdone’.

Analyst James Beard initiated coverage with a ‘buy’ recommendation and target price of 980p on the shares, which were trading at 717.3p yesterday.

‘Babcock’s shares endured a challenging 2016 and 2017, as concerns over slowing organic growth, the performance of Avincis post-acquisitions, and a succession of warnings and balance sheet issues at other outsourcers led to a significant de-rating of the shares,’ he said.

‘We believe that the market’s concerns are overdone, albeit there are few short-term catalysts for the shares.’

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Look up the shares

  • William Hill PLC (WMH.L)
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  • Ocado Group PLC (OCDO.L)
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  • Dixons Carphone PLC (DC.L)
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  • Sage Group PLC (SGE.L)
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  • Babcock International Group PLC (BAB.L)
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