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Expert View: Hargreaves Lansdown, Mothercare and Cranswick

Our daily roundup of the best analyst commentary on shares, also including Anglo American and Great Portland Estates.

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Key stats
Market capitalisation£4,997m
No. of shares out474m
No. of shares floating220m
No. of common shareholdersnot stated
No. of employees752
Trading volume (10 day avg.)1m
Turnover£292m
Profit before tax£148m
Earnings per share31.44p
Cashflow per share31.93p
Cash per share37.60p

*Correct as at 28 Jul 2014

Hargreaves share weakness creates buying opportunity

Underperformance in Hargreaves Lansdown (HL) shares has created a buying opportunity in the online stockbroker.

Barclays analyst Daniel Garrod has retained his ‘overweight’ rating but lowered the target price from £15.50 to £14.90 ‘to reflect earnings per share cuts’. Shares are currently trading at £10.47.

‘Following strong outperformance in 2013, the Hargreaves Lansdown share has significantly underperformed in 2014 (-21% year to date vs FTSE 100 +1%),’ he said. ‘In part this reflects downward earnings per share revisions, due to lower yield on client cash, but in part reflects concerns around increased competition and downward pressure on revenue margins.

‘We believe that direct fees will lower gradually over time but are manageable. The reason why we continue to rate the stock “overweight” is we believe it is a strong beneficiary of the retail distribution review boosting client numbers and flows.’

He added that the platform would see increased flows in the rest of the year thanks to raised ISA limits and the Neil Woodford fund launch.

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Key stats
Market capitalisation£618m
No. of shares out49m
No. of shares floating45m
No. of common shareholdersnot stated
No. of employees4627
Trading volume (10 day avg.)0m
Turnover£995m
Profit before tax£43m
Earnings per share88.31p
Cashflow per share125.08p
Cash per share24.96p

*Correct as at 28 Jul 2014

Cranswick downgraded but results still ‘excellent’

Meat and sandwich supplier Cranswick (CWK) has been downgraded after like-for-like sales were down on last year but the company is still reporting ‘excellent’ results.

Numis analyst Charles Pick reduced his recommendation from ‘add’ to ‘hold’ but retained a target price of £13.26 on the shares, which are currently trading at £12.60.

‘Key first quarter features are: like-for-like sales of +5%, below the exceptionally good level seen last full year of +12% when some major new contracts featured but still excellent margins similar to first quarter of last full year,’ he said.

Pick said the main risk to Cranswick was the grocery price war impacting on suppliers ‘although post last year’s horse meat issues these have been more respectful of supporting British suppliers with shorter supply chains and better traceability’.

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Key stats
Market capitalisation£2,230m
No. of shares out344m
No. of shares floating337m
No. of common shareholdersnot stated
No. of employees91
Trading volume (10 day avg.)0m
Turnover£85m
Profit before tax£422m
Earnings per share122.52p
Cashflow per share122.61p
Cash per share2.27p

*Correct as at 28 Jul 2014

Great Portland Estates reaping the rewards of an improving market

First quarter results from real estate investment trust (Reit) Great Portland Estates (GPOR) show it is benefitting from limited supply and strong demand in the property market.

Peel Hunt analyst James Carswell retained a ‘buy’ rating and a target price of 720p on the shares, which are currently trading at 643.5p.

‘Great Portland is significantly increasing its development programme into a market of very limited supply and strong demand – illustrated [in its] reducing vacancy, increasing rents and lettings above estimated rental values,’ he said.

‘The West End is also continuing to see yield compression and this will push net asset value growth beyond our forecast – with the shares trading on a small net asset value discount, we remain buyers.’

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Key stats
Market capitalisation£208m
No. of shares out89m
No. of shares floating81m
No. of common shareholdersnot stated
No. of employees3486
Trading volume (10 day avg.)0m
Turnover£725m
Profit before tax£-27m
Earnings per share-31.00p
Cashflow per share-8.12p
Cash per share19.48p

*Correct as at 28 Jul 2014

Mothercare: shareholders relying on hope after Destination Maternity withdraws bid

US retailer Destination Maternity has announced it won’t be returning with a further bid for Mothercare (MTC) after two previous bids were rejected.

Liberum analysts retained a ‘sell’ rating and target price of 160p on the shares after the Destination Maternity announcement. Shares fell 7.8% to 238p yesterday on the news.

Analysts said it withdrew ‘as a result of resistance from Mothercare shareholders who saw the 300p offer as undervaluing the company, and Mothercare unwilling to open its books in any case’.

Mothercare has also been hit by the announcement that its financial director Matt Smith is leaving for Debenhams.

‘This leaves Mothercare with a high calibre, newly appointed chief executive, Mark Newton Jones and investors with little more than hope at this stage to support the share price.’

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Key stats
Market capitalisation£22,681m
No. of shares out1,397m
No. of shares floating1,301m
No. of common shareholdersnot stated
No. of employees98000
Trading volume (10 day avg.)5m
Turnover17,289m USD
Profit before tax-566m USD
Earnings per share-0.44 USD
Cashflow per share1.41 USD
Cash per share3.26 USD

*Correct as at 28 Jul 2014

Momentum picks up at Anglo American but can it continue?

Miner Anglo American (AAL) has reported better-than-expected first-half results but Jefferies analysts are unsure this positive momentum can continue throughout the rest of the year.

Analyst Christopher LeFemina retained a ‘hold’ rating and a target price of £17.00, noting that while operational improvements were ‘encouraging…significant challenges remain’. Shares are currently trading at £16.33.

‘Anglo American reported better than expected results for the first half of 2014. The beat can mostly be attributed to very good results at [diamond mining company] DeBeers and [Chilean mine] Collahuasi,’ he said.

‘Second half results should be negatively affected lower copper grades, an increase in waste mining at [South African mine] Sishen, and seasonal weakness in diamond sales, but Anglo enthusiasts should be encouraged by the strong first half results.’

He added that challenges remained in South African operating cost inflation, lower grades in copper, and negative free cash flow until 2016.

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