The Expert View: Countrywide, Hammerson and Porvair
Our daily roundup of analysts' share recommendations and commentary, also featuring Coca-Cola HBC and Fidessa.
‘Watershed year’ for housing market helps Countrywide
Estate agent Countrywide (CWD.L) will benefit from increasing housing transactions this year which will give scope for earnings upgrades and higher share valuations.
Panmure analyst Keith Baird maintained a ‘buy’ recommendation and a share price of 700p (current price 609p) on the back of a ‘bullish report on the housing market for 2014’ from LSL Property Service in which it foresaw a ‘watershed year’.
The number of transactions in the UK is expected to reach 1.1 million, up from 800,000 last year, based on January transactions that topped 73,000. On the back of this estimate Countrywide earnings per share could hit 48p in 2014, up from 35p, and 60p in 2015, up from 47p.
However, Baird showed some caution: ‘Given that this is just one month’s figures, we think it prudent to await the full year results on 27 February before updating our forecast.’
Coca-Cola HBC loses its fizz
Uncertainty remains around Coca-Cola HBC (CCH.L), the drinks giant’s FTSE 100 listed European bottler, as it faces increasing pricing, currency headwinds and higher taxes.
Barclays analyst Simon Hales maintained an ‘equal weight’ recommendation but lowered the target price from £18.25 to £15.50 (current price £15.49) although Q4 2013 results were better than expected driven by higher sales in Russia and Nigeria.
‘Despite market share gains, underlying trading conditions remain difficult,’ said Hales. ‘CCH is also facing an increase in concentrate pricing, negative FX and a higher tax rate. Consequently, return to previous peak margins of 10.8% remains some time away. We downgrade our price target to £15.05…following 10% fully year 2014 earnings per share cut and reduced medium term growth outlook.’
Fidessa thrives after a period of low growth
Financial markets software specialist Fidessa (FDSA.L) has had its target price increased by Jefferies after coming out of a period of poor growth.
Analyst Milan Radia maintained a ‘buy’ recommendation and increased the target price from £24.50 to £25.70 (current price £23.04).
‘Following a period of lower growth driven by sluggish equity markets, Fidessa management guidance implies that 4% to 5% organic growth may be feasible for 2014,’ said Radia.
‘Fidessa’s industry-leading visibility, exceptional market positions and strong progress in derivatives have together facilitated a premium rating versus software sector peers, a gap that could now expand further as growth rates improve.’
Over the past year Fidessa has added nine new customers, including three large deals with Citi, NewEdge and Nomura.
Hammerson a good deal compared to peers, says Liberum
Real estate investment trust (Reit) Hammerson (HMSO.L) is looking like a good deal compared to its peers, according to analysts at Liberum.
Jon Stewart maintained a ‘buy’ rating and placed a target price of 617p (current price 567p) on the shares following prelims that were ahead on earnings and solid on net asset value (NAV), with a 9.2% total return from NAV growth and dividends a ‘commendable result’.
Stewart noted that ‘the stock is valued at a 10% NAV discount to British Land and Land Securities despite broadly similar total returns of 10% per annum over the next two years on our forecasts’.
An improving UK economy is also providing encouragement to Hammerson and ‘underpinning an improvement in total returns…over the next two years’.
Porvair set for more outperformance, says Peel Hunt
Peel Hunt has increased its target price for filtration technology group Porvair (PRV.L) on the back of strong profitability and a belief that ‘there is more to come’.
Analyst Andrew Shepherd-Barron maintained a ‘buy’ rating and increased the target price from 335p to 342p (current price 296p) on the shares based on 2017 full year expectations that he considers ‘highly deliverable’.
‘On what we consider to be very reasonable assumption, both earnings per share and price target could be 37% higher,’ he said. ‘New products are capitalising on a strong market position and building an ever-increasing base of recurring earnings.’
Profit growth has been ahead of expectations on an average 30% for several years driven by ‘a mix of new products, contract wins, a continuing search for productivity and, more recently, an improving macro economy’, said Shepherd-Barron, adding that ‘we believe such outperformance can continue’.