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The Expert View: Berendsen, Synergy Health and Tesco

Our daily roundup of the best analyst commentary on shares, also including Workspace Group and Bellzone Mining.

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Key stats
Market capitalisation£1,738m
No. of shares out173m
No. of shares floating167m
No. of common shareholdersnot stated
No. of employees14988
Trading volume (10 day avg.)0m
Turnover£1,054m
Profit before tax£85m
Earnings per share49.60p
Cashflow per share169.31p
Cash per share51.71p

*Correct as at 4 Jun 2014

Berendsen boosted by Synergy Health read-across

Provider of industrial laundry services for hotels and hospitals Berendsen (BRSN) has been boosted by read-across from sterilising services provider Synergy Health’s full year results that highlighted a loosening of the NHS purse strings.

Peel Hunt analyst Christopher Bamberry retained a ‘buy’ rating and target price of £11.40 on the shares as Synergy highlighted a ‘recent improvement in NHS spend and a potential reopening of the outsourcing market’ which should be beneficial to Berendsen. Shares in the company rose 0.7% to £10.16 yesterday.

‘[There is] positive industry backdrop read-across from Synergy,’ said Bamberry. ‘A reopening of the UK NHS outsourcing market and pre-election boost should be beneficial to Berendsen’s UK healthcare business – which accounted for around 8-9% of 2013 group revenue – and its clinical solutions business – which accounted for 7% of 2013 group revenues.’

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Key stats
Market capitalisation£768m
No. of shares out59m
No. of shares floating56m
No. of common shareholdersnot stated
No. of employees5256
Trading volume (10 day avg.)0m
Turnover£361m
Profit before tax£31m
Earnings per share51.97p
Cashflow per share138.58p
Cash per share43.04p

*Correct as at 4 Jun 2014

Synergy Health lags consensus but reiterates growth aim

Growth at sterilising services provider Synergy Health (SYR) may be slightly below forecasts but it is still set for a 15% increase in revenue.

Numis analyst Charles Weston retained an ‘add’ rating and target price of £13.80 on the shares despite its full year 2014 revenue growth of 5.3% to £380 million being 1% below his estimate and 2% below consensus. Shares fell 4p to £13.13 yesterday.

‘Despite “challenging economic conditions”, Synergy has reiterated its 15% per annum revenue and earnings growth target… as it continues to internationalize business… remaining focused on US, UK and Asia,’ he said. ‘We continue to believe in the long-term structural growth of Synergy’s markets and the company’s ability to continue to gain share, and therefore while we would not be aggressively buying at the current price, we would use any potential weakness to build positions.’

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Key stats
Market capitalisation£24m
No. of shares out742m
No. of shares floating218m
No. of common shareholdersnot stated
No. of employees119
Trading volume (10 day avg.)2m
Turnover0m USD
Profit before tax-32m USD
Earnings per share-0.05 USD
Cashflow per share-0.04 USD
Cash per share0.03 USD

*Correct as at 4 Jun 2014

Bellzone expected to fall on share placing

Shore Capital has suspended its recommendation of Bellzone Mining (BZM) as it expects the shares to fall due to issuing of new stock.

Analyst Yuen Low has ‘no recommendation’ and no target price for the company which is to raise £1.1 million through the issue of 51.3 million shares at 2.5p a share. Bellzone Mining closed down 6.25p at 3p yesterday.

China Sonagol, which invests in oil and gas exploration and production, has said it will subscribe for any shares not taken up, after Bellzone had initial talks with the company about financing.

‘Bellzone expects the proceeds to be sufficient to continue operations until early August 2014 – in the meantime, the company remains in “active discussions” with “other potential providers of finance”,’ said Low. ‘Naturally we expect the shares to fall towards the placing price.’

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Key stats
Market capitalisation£23,831m
No. of shares out8,119m
No. of shares floating8,104m
No. of common shareholdersnot stated
No. of employees510444
Trading volume (10 day avg.)16m
Turnover£63,557m
Profit before tax£1,916m
Earnings per share23.72p
Cashflow per share42.77p
Cash per share43.50p

*Correct as at 4 Jun 2014

UK sales falls aren’t the only problem facing Tesco

Poor first quarter results from supermarket giant Tesco (TSCO) were expected but Jefferies analysts remain concerned about more than just sales falls.

Analyst James Grzinic retained a ‘hold’ recommendation and target price of 310p after the company reported a third consecutive quarter of falling sales amid competition from discount supermarkets. In the three months to 24 May the supermarket reported like-for-like UK sales fell by 3.7%. Shares rose 1% to 300.5p yesterday.

‘Tesco’s Q1 update confirmed protracted UK pressures and further sales falls in Asia,’ said Grzinic. ‘Sales in Europe remain marginally negative and with the group’s biggest operating cashflow driver still failing to show signs of stabilisation, we remain concerned by the group’s leverage structure. Given this context, valuation attractions are of limited consequence for now.’

The UK remains the ‘key concern’ for Grzinic and pressure is expected to remain but there is also ‘exceptional cash usages’, such as pension top-ups in China, that mean ‘meaningful organic deleverage does not appear to be likely mid-term’.

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Key stats
Market capitalisation£881m
No. of shares out146m
No. of shares floating100m
No. of common shareholdersnot stated
No. of employees170
Trading volume (10 day avg.)0m
Turnover£70m
Profit before tax£76m
Earnings per share52.06p
Cashflow per share52.40p
Cash per share6.97p

*Correct as at 4 Jun 2014

Investec impressed by Workspace Group’s ‘exceptional’ results

Commercial property letting company Workspace Group (WKP) has reported full year results ‘well ahead of expectations’.

Investec analyst Alison Watson retained a ‘buy’ recommendation but increased the target price from 620p to 676p. The shares rose 4.2% to 608.5p yesterday.

She noted the ‘exceptionally strong final results’ that have pushed net asset value (NAV) growth up 43%.

‘Acceleration in both yield compression…and rental growth, alongside added value surpluses, has delivered 27% year-on-year portfolio growth,’ she said. ‘The shares trade on a 17% premium to NAV (UK sector average of 9%). We raise out target price by 9% to 676p, which is based on 15% premium to our 12-month forward NAV.’

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