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The Expert View: Burford, Greencore and TP Icap

Our daily roundup of analyst commentary on shares, also including Close Brothers and Brooks Macdonald.

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If you would like to receive news alerts on any of the stocks mentioned in The Expert View, click on the star icons below to add them to your favourites.

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Key stats
Market capitalisation£2,280m
No. of shares out208m
No. of shares floating181m
No. of common shareholdersnot stated
No. of employeesn/a
Trading volume (10 day avg.)415,320
Turnover118m USD
Profit before tax90m USD
Earnings per share0.38 USD
Cashflow per share0.38 USD
Cash per share0.62 USD

Burford bags huge return on case

Litigation finance provider Burford Capital (BURF) has sold one of its cases for a 736% return, a sign of ‘impressive development’ at the firm, according to Liberum.

Analyst Justin Bates retained his ‘hold’ recommendation and target price of £11.08 on the stock after Burford sold Teinver for $107 million, a case centring on Argentina’s expropriation of two airlines. Burford’s initial investment in Teinver was $12.8 million, and the sale represents a 736% return.

‘The sale represents continued impressive development of a secondary market for litigation investments, prudent management of Burford’s balance sheet risk and accelerates the receipt of cash to be re-invested in high return investments,’ said Bates.

The shares rose 5p to £11.01 yesterday.

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Key stats
Market capitalisation£932m
No. of shares out707m
No. of shares floating701m
No. of common shareholdersnot stated
No. of employees15795
Trading volume (10 day avg.)4m
Turnover£2,320m
Profit before tax£190m
Earnings per share1.86p
Cashflow per share12.63p
Cash per share2.81p

Greencore restructuring hits shares

Shares in Greencore (GNC) tumbled yesterday as the Irish food group warned 2018 profits would be lower than expected, blaming poor weather in the UK and delays in its US business.

Jefferies analyst Martin Deboo retained his ‘buy’ recommendation and target price of 300p on the stock, which tumbled 30.3% to 127.3p yesterday.

‘The US manufacturing footprint is to be rationalised, centring on the mothballing of Rhode Island. Leadership in the US is being changed, with the chief executive taking a more hands-on role,’ he said.

‘Low utilisation in the US, a back-loaded commercial pipeline and foreign exchange drive a c.5% earnings per share guidance downgrade and a £3 million restructuring charge.’

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Key stats
Market capitalisation£2,705m
No. of shares out554m
No. of shares floating547m
No. of common shareholdersnot stated
No. of employees2704
Trading volume (10 day avg.)1m
Turnover£892m
Profit before tax£146m
Earnings per share17.18p
Cashflow per share22.32p
Cash per share249.45p

More good than bad at TP Icap, says Numis

Interdealer broker TP Icap (TCAPI) is facing regulatory and Brexit headwinds but Numis believes it will be able to create synergies of at least £120 million over the medium term.

Analyst Marcus Barnard retained his ‘add’ recommendation and target price of 600p on the stock after 2017 results that showed profit before tax edging up to £233 million.

He said regulation and Brexit costs were expected to continue and the year had ‘started with an unfavourable dollar-sterling move which represents a 4% headwind compared to 2016’, but there was still things to be positive about.

‘We continue to favour TP Icap as we believe it will be able to generate significant net synergies of at least £120 million over the medium term as the rationalisation of back office functions and falling broker compensation more than offsets any revenue attrition,’ he said.

‘Furthermore, we believe the group’s dominant market position and diverse product range means it will be a key beneficiary of further US rate rises, steepening yield curves, and ongoing global political uncertainty and volatility in energy/commodity prices.’

The shares slumped 10.5% to 482.7p yesterday.

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Key stats
Market capitalisation£299m
No. of shares out14m
No. of shares floating11m
No. of common shareholdersnot stated
No. of employees500
Trading volume (10 day avg.)m
Turnover£92m
Profit before tax£13m
Earnings per share42.76p
Cashflow per share78.44p
Cash per share241.91p

Shore Capital considers Brooks Macdonald downgrade

Shore Capital is considering moving discretionary fund manager (DFM) Brooks Macdonald (BRK) back to a ‘sell’ as it believes the shares have rallied far enough.

Analyst Paul McGinnis retained his ‘hold’ recommendation on the stock after half-year results that showed revenue was up 11% year-on-year to £48.8 million.

He upgraded from ‘sell’ to ‘hold’ in November when the shares fell below his ‘fair value’ of £19 and he said he ‘would continue to highlight the apparent disconnect between the very strong asset gathering and the profit and loss account’.

‘The company’s highly developed relationship with the IFA sector has driven the strong inflows and we see no reason why this won’t continue in the short term,’ said McGinnis.

‘However, we do harbour some medium-term concerns that regulators might apply more scrutiny to this relationship between DFMs and advisers in its attempt to reduce the overall cost of investment to retail advisers.’

He added that while there was no change to his price target, he now sees ‘the shares at a level where we would consider moving back to "sell"’.

The shares fell 5.3% to £20.60 yesterday.

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Key stats
Market capitalisation£2,345m
No. of shares out151m
No. of shares floating148m
No. of common shareholdersnot stated
No. of employees3114
Trading volume (10 day avg.)m
Turnover£579m
Profit before tax£363m
Earnings per share127.50p
Cashflow per share165.60p
Cash per share531.83p

Peel Hunt downgrades Close Brothers

Peel Hunt has downgraded Close Brothers (CBRO) after recent strong share price performance at the wealth manger.

Analyst Stuart Duncan downgraded his recommendation from ‘buy’ to ‘hold’ with a target price of £16.00 on the shares, which fell 3.2% to £15.24 yesterday.

‘Interim results exemplified Close Brothers – good quality profits growth in a controlled manner,’ he said. ‘All three divisions are performing well and the outlook remains positive for the second half. We see scope for modest upgrades to full-year expectations, although given recent share price performance our recommendation moderates to "hold".’

He added that the shares traded on a price/earnings ratio of 11.6x while yielding 4.1%, which ‘does not look overly demanding’.

‘Close consistently delivers solid growth, importantly retaining the focus on returns and not loan book volumes,’ said Duncan. ‘This places the business in good stead.’

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