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The Expert View: Esure, Cobham, Craneware, Tyman & Fenner

Our daily roundup of analysts' share recommendations and commentary.

Key stats
Market capitalisation£1,118m
No. of shares out417m
No. of shares floating268m
No. of common shareholdersnot stated
No. of employees1538
Trading volume (10 day avg.)0m
Turnover492m EUR
Profit before tax73m EUR
Earnings per share0.18 EUR
Cashflow per share0.19 EUR
Cash per share0.08 EUR

*Correct as at 11 Mar 2014

Esure waiting for the right environment to prosper

Online insurer Esure (ESUR.L) could be set for a good 2014 but the right trading environment is ‘yet to materialise’, says Numis.

Numis analyst Nick Johnson retained an ‘add’ recommendation and a target price of 320p on the shares following full year 2013 results. The company reported profits before tax of £118.4 million, in lie with consensus, and the total dividend for the year of 15.8p is 2p ahead of market forecasts.

Esure expects 2014 premium income to be similar to 2013, although it estimates that weather losses so far this year are £3-4 million more than budget.

‘Esure has delivered on its revised expectations for 2013,’ said Johnson. ‘We think that guidance for 2014 points to flat profits versus current consensus growth of +7%. We continue to think that Esure has strong growth potential in the right trading environment, but that scenario has yet to materialise.’

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Key stats
Market capitalisation£3,292m
No. of shares out1,079m
No. of shares floating1,058m
No. of common shareholdersnot stated
No. of employees9992
Trading volume (10 day avg.)3m
Turnover£1,749m
Profit before tax£172m
Earnings per share15.93p
Cashflow per share27.46p
Cash per share24.77p

*Correct as at 11 Mar 2014

Cobham fighting against market slowdown

Defence and security specialist Cobham (COB.L) has had to work hard to mitigate a slowdown in both the defence and commercial markets and will face further pressure this year from FX headwinds.

Cantor analyst Andy Chambers retained a ‘hold’ recommendation and placed a target price of 280p on the shares.

‘Cobham continues to mitigate defence related end market pressures with commercial activity growth,’ he said.

‘These drive flat organic sales growth, with the company working at an increased pace to offset margin pressures within both activities. The operations stagnation will be further undermined this year by adverse FX translation effects.’

However, despite these concerns Chambers said cash conversion remains healthy and the shares are close to ‘fair value’ and ‘well rated in comparison to other UK defence plays’.

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Key stats
Market capitalisation£158m
No. of shares out27m
No. of shares floating19m
No. of common shareholdersnot stated
No. of employees198
Trading volume (10 day avg.)0m
Turnover25m USD
Profit before tax5m USD
Earnings per share0.18 USD
Cashflow per share0.22 USD
Cash per share0.67 USD

*Correct as at 11 Mar 2014

Craneware to benefit from shake-up of US healthcare

Craneware (CRW.L), provider of software to US hospitals, reported increasing contract wins in its half year results and a recovery in revenue growth.

Peel Hunt analyst Alexandra Jarvis maintained a ‘buy’ recommendation and a target price of 600p on the shares, as she believes the company will benefit from the pressures facing US healthcare to reduce costs.

‘Background trends remain highly favourable given the pressures on the US healthcare system to bring costs into a sustainable range,’ she said. ‘New healthcare pricing models will emerge, alongside a greater focus on value and outcomes and a drive to reduce administrative inefficiencies and errors. Technology will play a key role in eliminating waste and providing the data to support new business models.’

Jarvis maintained a forecast for 10% growth for the full year but said it could increase to the mid-teens in the medium term.

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Key stats
Market capitalisation£497m
No. of shares out170m
No. of shares floating164m
No. of common shareholdersnot stated
No. of employees1888
Trading volume (10 day avg.)0m
Turnover£229m
Profit before tax£-22m
Earnings per share-16.93p
Cashflow per share4.98p
Cash per share27.07p

*Correct as at 11 Mar 2014

Tyman benefitting from US and UK housebuilding

Growth in the US property building market and ‘first signs’ of growth in the UK are benefitting Tyman (TYMN.L), which supplies building products to the door and window industry.

The company had a good 2013, particularly in the US despite the exceptionally cold weather, said Liberum analyst Charlie Campbell, who retained a ‘buy’ recommendation and a target price of 260p.

He said the US recovery is set to continue in 2014 and the UK housebuilding market recovery is just starting.

‘Encouragingly the year is said to have started well in the US, in spite of exceptional winter weather, with activity ahead of last year. Management expects continued improvements in new residential construction and a gradual increase in residential repair, maintenance and improvement,’ said Campbell.

‘The UK market is finally starting to turn around, with management stating that the year has started well. Grouphomesafe [which provides door and window hardware] is well placed to benefit from cyclical recovery, but management believes that it can also grow market share through new products and continued service improvements.’

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Key stats
Market capitalisation£823m
No. of shares out194m
No. of shares floating191m
No. of common shareholdersnot stated
No. of employees5272
Trading volume (10 day avg.)0m
Turnover£821m
Profit before tax£46m
Earnings per share23.52p
Cashflow per share45.54p
Cash per share51.18p

*Correct as at 11 Mar 2014

Fenner is good value if the worst of its problems are over

Conveyor belt specialist Fenner (FENR.L) has been stumped by contract delays that could lead to an earnings per share downgrade, but the shares could still offer value.

Jefferies analyst Andy Douglas retained a ‘buy’ rating and a target price of 505p as he thinks the company may be through the worst of its troubles.

‘Fenner’s pre-close update was broadly as we anticipated in respect of the 1H14 performance and a heavy 2H14 bias in the current year was expected,’ he said. ‘The on-going contract delays into FY15…are unhelpful…and will likely drive low to mid-single digit consensus earnings per share downgrades.

‘There are risks attached, but if the group is through the worst, the shares offer value although the market will want proof, rather than assuming it.’

Douglas added that there were reasons to be optimistic, including market recovery and long-term investment in the company.

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