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The Expert View: Aggreko, Serco and Interserve

Our daily roundup of the best analyst commentary on shares, also including SDL and Stanley Gibbons.

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Key stats
Market capitalisation£4,439m
No. of shares out256m
No. of shares floating227m
No. of common shareholdersnot stated
No. of employees6000
Trading volume (10 day avg.)1m
Turnover£1,573m
Profit before tax£246m
Earnings per share96.80p
Cashflow per share206.19p
Cash per share14.91p

*Correct as at 6 Aug 2014

Aggreko’s ‘cracking Q2’ underpins momentum

Momentum at power provider Aggreko (AGK) is ‘turning positive’ after impressive interim results.

Jefferies analyst Will Kirkness reiterated a ‘buy’ recommendation and increased his target price from £18.00 to £20.00. Shares fell 1% to £17.22 yesterday.

‘With interim earnings per share 5% ahead of consensus… it feels as though momentum is really turning positive,’ he said. ‘Power projects had a cracking Q2 and improving utilisation, a buoyant pipeline and increased capex gives us confidence. A strong local backdrop supports the group.’

The interim statement reported underlying revenue growth was up 12% and profit before tax was up 5% ahead of consensus at £132.5 million, meaning earnings per share were up to 36.5p.

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Key stats
Market capitalisation£139m
No. of shares out47m
No. of shares floating43m
No. of common shareholdersnot stated
No. of employees152
Trading volume (10 day avg.)0m
Turnover£36m
Profit before tax£5m
Earnings per share18.55p
Cashflow per share20.21p
Cash per share23.81p

*Correct as at 6 Aug 2014

Stanley Gibbons property sale gets stamp of approval

Stamp collectable seller Stanley Gibbons (SGI) has sold of the premises of coin seller Baldwin after the takeover of its parent company Noble at the end of last year.

Peel Hunt analyst Charles Hall retained a ‘buy’ recommendation and target price of 400p on the stock after the sale of Adelphi Terrace in London, the former home of Baldwin, for a higher-than-expected price of £4.5 million. Shares were trading flat at 299p yesterday.

‘Completion is due in November and this fits nearly with the planned move of the Baldwin’s team into Stanley Gibbons premises on the Strand this autumn,’ he said. ‘This will take net cash to around £15 million, giving the company significant firepower to acquire additional stock.

‘The shares are trading on 14.8X to March 2015 price/earnings ratio, and this looks good value given the scale of opportunity and the level of asset backing.’

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Key stats
Market capitalisation£921m
No. of shares out144m
No. of shares floating138m
No. of common shareholdersnot stated
No. of employees25383
Trading volume (10 day avg.)0m
Turnover£2,193m
Profit before tax£50m
Earnings per share38.16p
Cashflow per share74.20p
Cash per share44.87p

*Correct as at 6 Aug 2014

Interserve looks cheap following ‘encouraging’ update

Construction company Interserve (IRV) has reported ‘encouraging’ first half results but there are risks to the upside, according to Liberum analyst Joe Brent.

Brent retained a ‘buy’ recommendation and target price of 750p on the shares after profits and net debt came in better than expected and the company moved to derisk its pension. Interserve rose 3.9% to 637p yesterday on the news.

He noted that while there was ‘early cycle recovery in UK construction’ there were ‘weak profits at international construction, but the order book is up, which may signify the turn’.

‘The shares are trading on a 2015 price/earnings ratio of 9.5X, which is still not expensive,’ he said. ‘This seems cheap given the encouraging trading throughout the business, and the contract momentum.’

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Key stats
Market capitalisation£1,840m
No. of shares out549m
No. of shares floating533m
No. of common shareholdersnot stated
No. of employees94980
Trading volume (10 day avg.)1m
Turnover£4,288m
Profit before tax£95m
Earnings per share19.06p
Cashflow per share37.80p
Cash per share23.01p

*Correct as at 6 Aug 2014

Serco downgraded as recovery priced in

A recovery is already being priced in to shares for outsourcing company Serco (SRP), leading Numis analysts to downgrade the stock.

Analyst Julian Cater downgraded his recommendation from ‘hold’ to ‘reduce’ and lowered the target price from 360p to 295p after predicting a ‘bath shaped recovery’. Shares fell 5.3% to 334.7p yesterday.

‘We believe that the market is already pricing in a significant operational turnaround at Serco post the appointment of Rupert Soames as chief executive. In our opinion, significant market risks still exist to short-medium term forecasts and it will take a considerable length of time to stabilise a business that has seen huge staff turnover, and very significant contract attrition, before any sort of recovery can be delivered,’ he said.

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Key stats
Market capitalisation£268m
No. of shares out81m
No. of shares floating78m
No. of common shareholdersnot stated
No. of employees3177
Trading volume (10 day avg.)0m
Turnover£266m
Profit before tax£-28m
Earnings per share-34.75p
Cashflow per share-19.06p
Cash per share22.64p

*Correct as at 6 Aug 2014

SDL results point to recovery for software provider

Enterprise software marker SDL (SDL) has given Investec analysts hope of a recovery in language services and technology.

Analyst Julian Yates retained a ‘buy’ recommendation and a target price of 420p following first half results for the group. Shares fell 1.1% to 329p yesterday.

‘The H1 2014 results gave reason to further stress SDL’s valuation anomaly,’ he said. ‘The recovery of language services is sustainable, in our view, and early indicators in technology are encouraging. With some margin upside potential in language services versus our forecasts, as top line growth comes through, this supports a full year 2015 valuation view.

He added that measures to bring all products into the same suite and align sales ‘marks a major transition that will only now start to impact results’.

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