The Expert View: Glaxo, Barclays and Shanta Gold
Our daily roundup of the best analyst commentary on shares, also including SpeaceandPeople and Randall & Quilter.
GlaxoSmithKline’s Novartis deal wins upgrade from Panmure
Panmure Gordon analyst Savvas Neohpytou has upgraded his rating for GlaxoSmithKline (GSK.L) from ‘hold’ to ‘buy’ after the pharmaceutical giant struck a deal with rival Novartis to offload its oncology business.
The deal will see Glaxo swap its underperforming oncology arm for Novartis’ vaccines business, and launch a joint venture of both companies’ consumer businesses.
Nephoytou said the deal was a ‘sensible portfolio management’ step and retained his target price of £17.50. Shares closed yesterday up 84p, or 5.4%, at £16.43.
‘GlaxoSmithKline has underperformed in recent weeks, impacted mainly by missed upgrading opportunities from the pipeline and corruption allegations in the company’s Middle East and North Africa business,’ he said.
‘[The] transaction shows management will not sit idly by waiting for the pipeline to mature but will take brave decisions to unlock shareholder value.’
SpaceandPeople severely downgraded after profit warning
Advertising broker SpaceandPeople (SAL.L) has been double downgraded following a profit warning.
Cantor analyst Sue Munden downgraded the AIM-listed company, which acts as a broker for advertising space in venues such as shopping centres, garden centres and retail parks, from ‘buy’ to ‘sell’ and the target price slashed from 170p to 72p. The shares were trading down 4.3% yesterday at 77p.
Munden’s downgrade comes after the company last week reported a 12% shortfall in revenue in the first quarter and that it expected profits to come in at half the expected level for the rest of the year.
‘The profit warning may well rattle investors and clearly the severity of the downgrade significantly reduces the profit and dividend prospects for the next two years leading to a sharp fall in our valuation,’ said Munden.
‘The question is whether this is a weakness caused by delays in sealing contracts and government approvals or does it herald a more fundamental flaw to the model. We still believe in the viability of the model… the business is pioneering in its delivery of [its] services and therefore teething problems will emerge.’
She added that ‘core businesses are experiencing problems at once’ and so a downgrade reflected the risks.
Barclays investment bank revamp could boost share price
A rescheduling of Barclays’ (BARC.L) first quarter interim management statement has led Shore Capital analysts to speculate on a revamp of its investment banking arm.
Analyst Gary Greenwood maintained a ‘buy’ recommendation on the shares, which were trading relatively flat at 245p yesterday.
The bank has pushed its first quarter statement to 6 May from 30 April and is also planning a ‘strategy day’ for 8 May which Greenwood said ‘is likely to involve a more serious revamping of the investment bank’. There are also rumours circulating that the bank is to wind down its commodities trading arm.
‘We would expect the outcome of any strategy update to result in lower revenue and profits in the investment bank being more than offset by lower capital consumption to allow for a higher future return on equity. With Barclays’ shares already trading on an undemanding multiple, a good presentation could therefore act as a positive catalyst for share price performance.’
Randall & Quilter upgraded on attractive share valuation
Investment business Randall & Quilter (RQIH.L) has been upgraded by Numis on the back of strong full year 2013 figures that prove the company is ‘heading towards long-term value’.
Analyst Nick Johnson upgraded his recommendation from ‘hold’ to ‘buy’ and retained a target price of 165p. The shares were up 0.7% at 131p yesterday.
The company reported profits before tax of £9.6 million, in line with Numis’ £9.5 million forecast, and that the acquisition pipeline had ‘never been healthier’.
‘Randall & Quilter has maintained its record of superior investment earnings with a return of 3.7% in 2013, being materially better than most peers,’ added Johnson.
The analyst is backing the shares on the company’s long-term growth prospects. ‘We are encouraged that short-term earnings look to be underpinned by healthy run-off activity, pending longer-term growth from the live ventures. Having sold off in the early part of this year we think Randall & Quilter shares now look attractive value.’
Take advantage of Shanta Gold share price now, says Peel Hunt
Full year results from Tanzania miner Shanta Gold (SHAN.L) show the company is ‘well positioned for the future’, according to Peel Hunt analyst Maurice Mason.
Mason has retained a ‘buy’ recommendation and a target price of 20p on the shares, which were trading down marginally 0.8% at 14.5p yesterday.
He noted strong cash generation and operating cash flows that have ‘enabled the company to significantly strengthen the balance sheet on previous years with a restructured debt position’.
‘The company remains well positioned for 2014 as a number of initiatives implemented in 2013 and currently in progress are set to bear fruit,’ said Mason. ‘Investors have an opportunity to capitalise on these improvements before they are reflected in the current share price.’