Expert View: Petra Diamonds, Greencore and Unilever
A roundup of analyst recommendations and comments, also including SDL and Coms.
Investec upgrades SDL target price on hopes for 2014
There is value to be made in enterprise software maker SDL (SDL.L) if it can continue to improve its service, leading Investec to increase its target price.
Investec analyst Julian Yates retained a ‘buy’ recommendation and increased the target price to 420p following a good set of results for 2013 where margins increased from the lows of the first half of last year.
Yates still expected technology to deliver a loss in 2014 but he expected the company to act on this by increasing the ‘organic top line’ and reducing costs.
‘The coming year will be crucial for the business in judging the impact of the investment initiatives and integrations of the product suite on the sales generation of the business,’ he said.
He added: ‘Assuming the service improvement is sustained, at current valuation levels we see material upside potential value in the technology business as delivery comes through.’
Rare blue diamond makes Petra sparkle
The discovery of 30 carat blue diamond means Petra Diamonds (PDL.L) continues to be the ‘preferred diamond play’ for Numis.
The miner discovered an ‘outstanding vivid blue’ 29.6 carat diamond, one of the rarest types of diamond, in the Cullinan mine in South Africa. Another blue diamond from the Cullinan mine sits atop of the Queen’s sceptre that is kept in the Tower of London.
Numis analyst Cailey Barker retained a buy recommendation and put a target price of 165p on the shares.
‘Given past exceptional stones, this could add something in the order of $15 million to $20 million to the bottom line, which is easy money in our view,’ he said.
Barker said he saw value in the shares over the long term and expected to see ‘steady earnings growth over the coming years’.
‘Petra Diamonds remains our preferred diamond play as a long term investment, with quality management and assets,’ he said.
Jefferies starts Greencore rating with a ‘buy’
Jefferies has initiated coverage of convenience food manufacturer Greencore (GNC.L) with a ‘buy’ recommendation.
Analyst David Kerstens placed a target price of 275p on the company, which makes pre-prepared sandwiches and ready meals for the UK and US market.
‘Greencore is a leading manufacturer of private label convenience foods, enjoying double-digit earnings growth on the back of strong sales momentum in its Food to Go businesses in the UK and US,’ he said. ‘The company is attractively valued at a 22% discount to the European food sector, which earnings per share growth is at a 50% premium.’
Kerstens predicts strong sales momentum in 2014 on the back of new products, market share gain and improving economic conditions.
Shore Capital reiterates ‘buy’ for Unilever
Unilever (ULVR.L) full year results for 2013 have come in above expectations, leading Shore Capital to reiterate its buy recommendation.
Shore Capital analyst Darren Shirley placed a target price of £24.37 on the shares after Unilever defied sales fall in developing and North American markets.
Shirley said ‘we see upward pressure on our forecasts driven by both sales and margin assumptions, and therefore may be nudging our below consensus forecasts of core earnings per share of €1.53 (consensus €1.60) though any upgrades are likely to be modest given on-going currency headwinds and still leave us below consensus’.
Although Shore Capital’s earnings per share forecast for Unilever aren’t set to meet consensus, Shirley said that it should not be forgotten that ‘Unilever has driven out a Q4 performance ahead of expectations which should be taken well by the market’.
Coms growing ‘unlike any other telecoms company’
Charles Stanley has reiterated its ‘buy’ recommendation for cloud-based telephone services provider Coms (COMS.L) after it announced £3.3 million of new business in two weeks.
Analyst Peter McNally placed a 6.0p target price on the shares after it completed a deal worth £2 million two weeks ago and followed up this week with another £1.3 million deal. However he placed an 8.0p price on shares for longer term investors.
‘The rate at which the company continues to grow, through both acquisition and organically, is quite astounding and unlike any other we are aware of in the telecom sector,’ said McNally. ‘Despite this the company remains reasonably valued given the growth.’