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The Expert View: FirstGroup, Segro and Carpetright

Our daily roundup of the best analyst commentary on shares, also including UK Mail and Fusionex.

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Key stats
Market capitalisation£1,623m
No. of shares out1,205m
No. of shares floating1,189m
No. of common shareholdersnot stated
No. of employees120475
Trading volume (10 day avg.)2m
Turnover£6,901m
Profit before tax£35m
Earnings per share5.89p
Cashflow per share78.21p
Cash per share115.40p

*Correct as at 21 May 2014

FirstGroup is on the long road to a turnaround

The turnaround of FirstGroup (FGP) will take a while but Liberum sees the first glimmers of hope as the company is shortlisted for five franchises to be awarded this year.

Analyst Gerald Khoo retained a ‘buy’ rating and a target price of 155p on the back of full year results that were in line with both Liberum’s forecasts and general consensus. Shares were yesterday up 2.1p, or 1.6%, at 134.3p.

‘First Student and Greyhound were hit by adverse weather, but the other divisions showed progress,’ he said. ‘The turnaround programme remains a long-term one, but we see rail franchise bids as an early positive catalyst with FirstGroup shortlisted for five franchises to be awarded this year.’

Last year’s rights issue diluted earnings per shares but ‘the failure to reinstate the dividend was not a huge surprise with the new chairman having hinted this was under review when he joined’.

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Key stats
Market capitalisation£2,632m
No. of shares out742m
No. of shares floating739m
No. of common shareholdersnot stated
No. of employees238
Trading volume (10 day avg.)2m
Turnover£274m
Profit before tax£211m
Earnings per share28.42p
Cashflow per share28.53p
Cash per share31.50p

*Correct as at 21 May 2014

Overhaul of Segro on track

The 2011 plan to overhaul warehouse and data centre provider Segro (SGRO) is on track as the company trades off between growth and earnings.

Jefferies analyst Mike Prew retained a ‘hold’ rating and target price of 344p after a meeting with Segro chief executive David Sleath, who implemented the ‘Sleath Plan’ in 2011 to boost high growth product areas and move away from ex-manufacturing space as the UK de-industrialises. Shares were flat yesterday at 353.7p.

‘It has been a successfully choreographed evolution with a trade-off between growth and earnings with some patches of rental growth now evident,’ said Prew. ‘The business has been boosting the portfolio content of modern, high growth areas of the industrial market into modern “big box” distribution centres and “datacenters”. The group is moving away from its roots in small industrial sheds… with their asbestos roofs.’

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Key stats
Market capitalisation£370m
No. of shares out68m
No. of shares floating43m
No. of common shareholdersnot stated
No. of employees3200
Trading volume (10 day avg.)0m
Turnover£458m
Profit before tax£-7m
Earnings per share-9.78p
Cashflow per share11.11p
Cash per share11.69p

*Correct as at 21 May 2014

Carpetright management changes will unnerve shareholders, says Peel Hunt

A change in management at Carpetright (CPR) has led Peel Hunt to put the company under review.

News that executive chairman Lord Harris and his son, group development director Martin Harris, will leave the group in September following the appointment of new chief executive Wilf Walsh led to analyst John Stevenson placed his rating ‘under review’ from ‘hold’. The 450p target price is also under review. Shares were yesterday down 4.5p, or 0.8%, at 545.5p.

‘We look for Carpetright to strengthen its retail team during the handover period,’ he said. ‘Lord Harris and Martin Harris control a combined shareholding of around 20%, which will not be subject to lock-up, although both will remain committed shareholders of the business.

‘We expect the sheer scale of change to unnerve shareholders, not least due to the new chief executive’s lack of big box home related retailing experience.’

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Key stats
Market capitalisation£333m
No. of shares out55m
No. of shares floating25m
No. of common shareholdersnot stated
No. of employees2649
Trading volume (10 day avg.)0m
Turnover£475m
Profit before tax£14m
Earnings per share24.68p
Cashflow per share38.75p
Cash per share51.52p

*Correct as at 21 May 2014

UK Mail is best in class for Investec

Investec has reiterated its ‘buy’ rating for UK Mail Group (UKM) after strong full year results and increasing growth prospects.

Analyst John Lawson reiterated his ‘buy’ and target price of 700p for the group, which provides parcel and express mail services to commercial customers. Shares were yesterday up 1.8p, or 0.3%, at 611.5p.

‘UK Mail has delivered another excellent performance in full year 2014 – like-for-like pre-tax profit rose by around 17% - with a very strong result in parcels – helped by the increase in home deliveries related to online shopping – and an industry beating outcome in mail,’ he said.

‘UK Mail continues to innovate and recent improvements in its IT infrastructure put the group as one of the “best in class” we believe. The significant capacity expansion should facilitate the next leg of growth.’

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Key stats
Market capitalisation£205.55m
No. of shares out43m
No. of shares floating12.3m
No. of common shareholdersnot stated
No. of employees128
Trading volume (10 day avg.)0.016m
Turnover£8.23m
Profit before tax£3.52m
Earnings per share0.08
Cashflow per share0.09
Cash per share0.16

*Correct as at 21 May 2014

Fusionex was good, but now it’s great

IT company Fusionex (FXIF) has gone from ‘good to great’, according to Panmure Gordon, after better than expected interim results.

Analyst George O’Connor retained a ‘buy’ recommendation and increased the target price from 649p to 657p. Shares were up 5p, or 1%, at 480p yesterday. O'Connor said the results showed an improving revenue mix, increased margins and sales plus ‘development of Fusionex’s channel and geographic reach’.

‘Fuisonex is a best in class example of the secular growth for the [social, mobility, analytics and cloud] SMAC…companies as it goes through a change from good to great,’ said O’Connor.

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