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The Expert View: BP, Premier Oil and Barratt Developments

Our daily round-up of analyst recommendations and commentary, also featuring ICAP and Hydrogen.

Our daily round-up of analyst recommendations and commentary, featuring BP, Premier Oil, Barratt Developments, ICAP and Hydrogen.

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Key stats
Market capitalisation£80,637m
No. of shares out19,055m
No. of shares floating18,986m
No. of common shareholdersnot stated
No. of employees83400
Trading volume (10 day avg.)32m
Turnover243,993m USD
Profit before tax16,224m USD
Earnings per share0.85 USD
Cashflow per share1.26 USD
Cash per share0.49 USD

*Correct as at 15 Nov 2012

Canaccord warns BP investors to expect more fines

Gordon Gray, analyst at Canaccord, has cautiously welcomed news that BP (BP.L) was close to reaching an agreement with US authorities over its role in the Deepwater Horizon incident, although he warned the settlement will represent only a 'partial solution'.

BP has confirmed talks with the US Department of Justice and Securities and Exchange Commission are now at an advanced stage, with press reports yesterday evening suggesting the judgement, which will be the biggest criminal penalty in US history, is imminent.

However, Gray said BP still faces federal civil claims, notably Clean Water Act penalties; federal and state Natural Resources Damage claims; state claims for economic loss; and private civil claims.

'Although the possible settlement represents a step forward for BP, we are not sure that the market will view it positively. We think it could be taken to indicate that BP is not close to a broader settlement to cover all the outstanding issues,' he said, reiterating his 'buy' recommendation.

'We think a figure for total settlement costs of $15 billion-$20 billion – as mentioned in the press recently - would be taken positively by the market, as it would allow BP to move forward with much greater clarity.'

Shares in the group closed at 425.4p on Thursday, down 0.35p or 0.08%.

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Key stats
Market capitalisation£1,758m
No. of shares out529m
No. of shares floating515m
No. of common shareholdersnot stated
No. of employees638
Trading volume (10 day avg.)2m
Turnover521m USD
Profit before tax108m USD
Earnings per share0.20 USD
Cashflow per share0.44 USD
Cash per share0.42 USD

*Correct as at 15 Nov 2012

Investec trims target price for Premier Oil as production schedule slips

Jerry Ho, analyst at Investec, has cut his target price for exploration and production company Premier Oil (PMO.L) on news that its Huntington and Rochelle development projects in the UK won't be ready until next year.

The delay means Premier's previous production target of 75,000 barrels of oil equivalent a day by the end of the year won't now be met, Ho said.

Premier currently has undrawn facilities of $1.1 billion and net debt of $1.1 billion, and the analyst warned that this production delay would strain the balance sheet. 'We maintain our view that additional slippage in Premier's production ramp-up in the medium term could place pressure on its conservative capital structure,' he said.

Ho's target price drops from 418p to 364p, and he reiterated his 'hold' recommendation.

Shares in the group closed at 332p on Thursday, down 2p or 0.6%.

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Key stats
Market capitalisation£1,821m
No. of shares out977m
No. of shares floating930m
No. of common shareholdersnot stated
No. of employees4500
Trading volume (10 day avg.)3m
Turnover£2,323m
Profit before tax£67m
Earnings per share6.88p
Cashflow per share7.04p
Cash per share15.40p

*Correct as at 15 Nov 2012

Deutsche Bank lifts target price for Barratt Developments

Glynis Johnson, analyst at Deutsche Bank, has increased her target price for homebuilder Barratt Developments (BDEV.L) following an encouraging trading update.

Wednesday's update, which covered the period from 1 July to 11 November, showed private forward sales up 21.1% year-on-year to £768.5 million. Net debt, meanwhile, is expected to fall to about £400 million by the end of the year, down £75 million from the previous guidance.

Johnson said the results should impress investors: 'We believe the market will like yet another set of results from Barratt showing robust trading and lower guidance for net debt.

'However, for us it is the increased confidence it gives us of the pull through of higher margin new land and the greater-than-expected contribution of profits from joint ventures in later years that have allowed us to increase our pre-tax profit expectations by 4% in 2013 and by more than 10% in 2014.'

Johnson's target price rises 8.2% to 224p, with a 'buy' recommendation.

Shares in the group closed at 185.5p on Thursday, up 0.1p or 0.05%.

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Key stats
Market capitalisation£1,845m
No. of shares out646m
No. of shares floating530m
No. of common shareholdersnot stated
No. of employees5123
Trading volume (10 day avg.)2m
Turnover£1,681m
Profit before tax£137m
Earnings per share20.82p
Cashflow per share38.60p
Cash per share84.67p

*Correct as at 15 Nov 2012

UBS cuts target price for ICAP

Arnaud Giblat, analyst at UBS, has lowered his target price for interdealer broker ICAP (IAP.L) after earnings came in below his forecasts.

In the six months to the end of September group revenues declined 14% to £746 million, and pre-tax profits sank 26% to £137 million. The group's chief executive, Michael Spencer, said 'This has been one of the toughest periods in my 36-year career in the wholesale financial markets.'

Giblat said the business faces fundamental problems, with consolidation in the market reducing the need for intermediation. 'With limited visibility on the sustainable level of volumes quarters away, we see this as a drag for the shares unless we see a cyclical recovery,' he said.

'We cut estimates by 9.6% in 2013 and 5-6% in 2014 and 2015, driven by lower operating profit margin.' Giblat's target price falls from 305p to 290p, with a 'neutral' recommendation.

Shares in the group closed at 284.2p on Thursday, up 2.8p or 1%.

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Key stats
Market capitalisation£22m
No. of shares out24m
No. of shares floating6m
No. of common shareholdersnot stated
No. of employees363
Trading volume (10 day avg.)0m
Turnover£156m
Profit before tax£2m
Earnings per share10.30p
Cashflow per share12.62p
Cash per share8.41p

*Correct as at 15 Nov 2012

Seymour Pierce downgrades Hydrogen on profits warning

Caroline de La Soujeole, analyst at Seymour Pierce, has downgraded recruitment company Hydrogen (HYDG.L) from 'buy' to 'hold' following a profit warning.

The company has warned that trading from the end of the summer to the end of November is expected to be below the board’s expectations, which it said reflected the difficult economic environment in both the UK and Far East.

Although a slight increase in net fee income is still expected this year, profits are now projected to be significantly below current market expectations.

Shares in the group closed at 90p on Thursday, down 18.5p or 17%.

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