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The Expert View: Centrica, Standard Life Aberdeen and Relx

Our daily roundup of analyst commentary on shares, also including Playtech and GoCompare.

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Key stats
Market capitalisation£7,089m
No. of shares out5,600m
No. of shares floating5,590m
No. of common shareholdersnot stated
No. of employees38278
Trading volume (10 day avg.)28m
Turnover£27,102m
Profit before tax£2,402m
Earnings per share31.19p
Cashflow per share48.18p
Cash per share34.51p

Centrica faces ongoing problems, says Jefferies

Shares in British Gas owner Centrica (CNA) have fallen by nearly a quarter in the past three months and Jefferies warns the outlook continues to look challenging.

Analyst Ahmed Farman retained his ‘hold’ recommendation and reduced the target price from 155p to 140p. The shares were trading at 126.8p yesterday.

‘Given the 23% share price decline over the last three months, we refresh our risk analysis to assess the value case for Centrica,’ he said. ‘We believe a 4.5% UK domestic retail earnings before interest and taxation margin is achievable for Centrica, but the market appears to be anticipating a tougher standard variable tariff cap scenario.’

A cap on tariffs is not the only concern for Farman ‘given ongoing customer losses, recent negative trends in commodity prices, and limited confidence in Centrica’s long-term growth strategy’.

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Key stats
Market capitalisation£10,622m
No. of shares out2,979m
No. of shares floating2,865m
No. of common shareholdersnot stated
No. of employees6302
Trading volume (10 day avg.)9m
Turnover£18,792m
Profit before tax£1,082m
Earnings per share18.61p
Cashflow per share25.13p
Cash per share401.14p

Lloyds issues a blow to Standard Life Aberdeen

Standard Life Aberdeen (SLA) merger has been undermined after Lloyds handed notice on the £109 billion of assets managed for the banking group, says Hargreaves Lansdown.

Lloyds is looking for a new home for its Scottish Widows assets, which represent 17% of Standard Life Aberdeen’s assets under management and 5% of revenues.

The shares fell 6% on the news and at the time of writing were trading down 4.5%, or 17.5p, at 371p.

Analyst Laith Khalaf said it was a ‘blow’ for Standard Life Aberdeen ‘but has been on the cards ever since the merger’ as Standard Life and Scottish Widows are rivals.

‘Losing this book of business would strike a sour note for the...merger, and undermines some of the rationale for joining forces, which was built on scale,’ he said.

‘However, while almost a fifth of Standard Life Aberdeen’s assets look like they might be walking out the door, this only equates to 5% of revenues, as these investment services are relatively low margin.’

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Key stats
Market capitalisation£29,466m
No. of shares out2,010m
No. of shares floating1,053m
No. of common shareholdersnot stated
No. of employees30000
Trading volume (10 day avg.)8m
Turnover£6,895m
Profit before tax£2,321m
Earnings per share55.82p
Cashflow per share85.01p
Cash per share7.93p

Numis: Relx, it’s a safe place to hide

Analytics company Relx (REL) remains a safe place ‘to hide’ but the shares are now fairly valued, says Numis.

Analyst Gareth Davies retained his ‘hold’ recommendation and target price of £15.50 on the shares following a ‘solid set’ of full-year results that showed underlying revenue growth of 4% and adjusted operating margin of 31.1%. The shares were up 1% at £14.70 yesterday.

‘No major divisional surprises in terms of either underlying growth or margin,’ said Davies.

‘In terms of numbers we do not expect to change underlying assumptions, though do need to update for currency, the recent acquisition and the US tax change, with a net small downside risk to 2018.’

He added that the company was a ‘relatively safe place to hide in the sector’ but he now feels ‘the shares are relatively fairly valued at current levels’.

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Key stats
Market capitalisation£2,401m
No. of shares out317m
No. of shares floating288m
No. of common shareholdersnot stated
No. of employees5254
Trading volume (10 day avg.)1m
Turnover630m EUR
Profit before tax263m EUR
Earnings per share0.49 EUR
Cashflow per share0.74 EUR
Cash per share1.53 EUR

Playtech ‘never cheaper’, says Shore Capital

Gaming software developer Playtech (PTEC) has never been cheaper and should become more ambitious in its capital returns to shareholders, says Shore Capital.

Analyst Greg Johnson retained his ‘buy’ recommendation on the stock, which dipped 5p to 756p yesterday.

‘Following recent price moves, Playtech’s combined stakes in Ladbrokes Coral and Plus500 is worth 112p per share - or 15% of the current market capitalisation,’ he said.

However, with the Playtech shares trading on ‘just’ seven times 2018 enterprise value/earnings, Johnson said ‘the market appears to be giving little credit to its balance sheet and cash generative capabilities, with the group maintaining a broadly debt neutral position including some €500 million (£444 million) of available cash resources’.

‘With the shares arguably never cheaper, we believe management… should be more ambitious in returning capital to shareholders.’

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Key stats
Market capitalisation£485m
No. of shares out418m
No. of shares floating306m
No. of common shareholdersnot stated
No. of employees172
Trading volume (10 day avg.)1m
Turnover£142m
Profit before tax£24m
Earnings per share3.76p
Cashflow per share4.14p
Cash per share4.40p

GoCompare: Liberum cautious despite positive acquisition

Liberum has upgraded estimates on GoCompare (GOCO) after its £36.5 million acquisition of MyVoucherCodes but remains ‘cautious’ on the price comparison website space.

Analyst Ian Whittaker reiterated his ‘hold’ recommendation but increased the target price from 102p to 140p. The shares were up 3.2% at 116p yesterday.

‘We update our estimates and target price for the MyVoucherCodes acquisition, which leads to a low to mid-teens double digit uplift to our adjusted earnings per share forecasts and an increase in our target price to 120p,’ he said.

‘We remain cautious overall on the price comparison website space as a whole.’

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