The Expert View: FirstGroup, Segro and Carpetright
Our daily roundup of the best analyst commentary on shares, also including UK Mail and Fusionex.
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’.
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.’
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.’
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.’
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.