The Expert View: Aviva, Rolls-Royce and Fresnillo
A roundup of some of the best analyst commentary on shares, including Aberdeen Asset Management and Babcock International.
Don't fret about Aviva's dividend, UBS says
Aviva (AV.L) looks set to maintain its dividend, according to UBS analyst James Pearce, who has a 'buy' recommendation on the shares.
'We think Aviva will maintain its dividend. Uncertainty had centred on execution risk around the disposal programme. Recent impressive news on disposals means the Chairman’s conditions have been satisfied, in our view,' Pearce said.
'Capital has been repaired, earnings cover looks solid, and the easing macro environment suggests a more benign background for upstreaming dividends to the holding company.'
The analyst put the chances of a dividend cut at 'less than 20%', and he doesn't think new CEO Mark Wilson will be tempted to cut it unless there is external pressure.
Shares in the group closed at 364p on Friday, up 1.9p or 0.5%.
RBC lifts target price for Rolls-Royce
Strong full-year results from Rolls-Royce (RR.L) have prompted RBC analyst Robert Stallard to increase his target price from £10.70 to £11.70.
Diluted earnings per share of 58p came in 6% ahead of consensus expectations on sales of £12.2 billion. Like-for-like operating profit was up 14% year-on-year against guidance for 'good growth'.
'We have liked Rolls for its steady growth prospects from widebody engines and the predictability of TotalCare. Today's results reaffirm the thesis,' Stallard said.
'The stock has had a good run in the last 12 months (+30%, +22% relative to the FTSE 100) but with emphasis on execution we see no reason why it can't continue its trajectory and premium valuation.' Stallard reiterated his 'overweight' stance on the shares.
Shares in the group closed at £10.11 on Friday, down 5.8p or 0.6%.
Citi downgrades Fresnillo on silver market fears
The demise of the bull market in silver means Fresnillo (FRES.L) no longer warrants its valuation, according to Citi analysts, who have downgraded the shares from 'neutral' to 'sell'.
The analysts have dropped from a price to net present value ratio for the shares of 2 to 1.6. 'We think that the earlier 2.0x is now too high in relation to the 1.3x that we are using on most other gold and silver stocks,' they said.
'We tolerated it in the silver bull market but no longer feel that it is appropriate. We see no reason why Fresnillo should trade on a 23x consensus price to earnings for 2013 when the consensus for Diversified Miners is 10.4x, unless there is a further silver bull market ahead of us.'
Citi's target price drops from £19.56 to £15.20.
Shares in the group closed at £15.66 on Friday, down 88.4p or 5.3%.
JPM welcomes bolt-ons at Aberdeen Asset Management
News that Aberdeen Asset Management (ADN.L) is to take a stake in two small rivals offers upside potential to earnings estimates, according to JP Morgan analyst Rae Maile.
Aberdeen plans to buy 50.1% of SVG Advisers, a wholly owned subsidiary of SVG Capital, for £17.5 million. It is also planning to buy Artio Global Investors, a listed asset management company with approximately $14.3 billion of assets under management. The price is $176 million, a premium of $35 million over Artio's unaudited net asset value at 31 December 2012.
Maile, who has an 'overweight' recommendation on the shares, hasn't changed her target price of 498p just yet, but believes that once complete the deals should be good news for the company.
Shares in the group closed at 428.8p on Friday, up 2.4p or 0.6%.
Babcock to gain from UK's cost-cutting plans, Berenberg Bank says
The looming deficit-reduction target should create further opportunities for outsourcing group Babcock International (BAB.L), according to Berenberg Bank analyst Simon Mezzanotte, who has a 'buy' recommendation on the shares.
'With the 2010 deficit reduction targets set by the UK Government now looming, Berenberg economists believe that fiscal tightening this year is set to treble relative to the past two years and continue at that pace in 2014/2015,' he said.
'Babcock is ideally placed to take advantage of this. The company is highly exposed to UK Defence (54% of sales), so far one of the most affected by budget and personnel cuts, and hence one of the most promising in terms of outsourcing opportunities.
'Against this backdrop, Babcock’s pipeline of potential new contracts has quadrupled in just two and a half years to £14bn, and could lead to sustained growth in the future.'
Babcock is Berenberg Bank's top pick in the UK business services sector, with a target price of £11.80.
Shares in the group closed at £10.48 on Friday, up 5.7p or 0.5%.