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The Expert View: Greene King, Beazley and DFS

Our daily roundup of analyst commentary on shares, also including Moneysupermarket and Unite.

Key stats
Market capitalisation£1,648m
No. of shares out310m
No. of shares floating300m
No. of common shareholdersnot stated
No. of employees42479
Trading volume (10 day avg.)2m
Turnover£2,217m
Profit before tax£152m
Earnings per share48.90p
Cashflow per share85.20p
Cash per share92.13p

Berenberg downgrades Greene King

Berenberg has downgraded pub group Greene King (GNK) as sales remain under pressure.

Analyst Owen Shirley downgraded his recommendation from ‘hold’ to ‘sell’ and reduced the target price from 700p to 450p. The shares fell 1% to 533p yesterday.

‘Since its last trading statement on 8 September, Greene King shares have fallen by c.15%,’ he said.

‘However, with like-for-like sales growth still likely to remain under pressure, and with margins declining and leverage set to remain stubbornly high, we see few reasons to own the shares.’

The group has a new chief financial officer joining at the end of the year and Shirley said there was ‘some near-term risk of management initiating a more material “kitchen-sinking” for current consensus numbers’. ,?

‘Of the higher yielding pub names, we continue to prefer Marston’s, where like-for-likes have been consistently higher, managed margins have held up better, de-leveraging is coming through, and the dividend is superior with a 7.2% yield.’

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Key stats
Market capitalisation£1,648m
No. of shares out310m
No. of shares floating300m
No. of common shareholdersnot stated
No. of employees42479
Trading volume (10 day avg.)2m
Turnover£2,217m
Profit before tax£152m
Earnings per share48.90p
Cashflow per share85.20p
Cash per share92.13p

Berenberg downgrades Greene King

Berenberg has downgraded pub group Greene King (GNK) as sales remain under pressure.

Analyst Owen Shirley downgraded his recommendation from ‘hold’ to ‘sell’ and reduced the target price from 700p to 450p. The shares fell 1% to 533p yesterday.

‘Since its last trading statement on 8 September, Greene King shares have fallen by c.15%,’ he said.

‘However, with like-for-like sales growth still likely to remain under pressure, and with margins declining and leverage set to remain stubbornly high, we see few reasons to own the shares.’

The group has a new chief financial officer joining at the end of the year and Shirley said there was ‘some near-term risk of management initiating a more material “kitchen-sinking” for current consensus numbers’. ,?

‘Of the higher yielding pub names, we continue to prefer Marston’s, where like-for-likes have been consistently higher, managed margins have held up better, de-leveraging is coming through, and the dividend is superior with a 7.2% yield.’

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Key stats
Market capitalisation£2,525m
No. of shares out526m
No. of shares floating509m
No. of common shareholdersnot stated
No. of employees1144
Trading volume (10 day avg.)2m
Turnover1,430m USD
Profit before tax190m USD
Earnings per share0.36 USD
Cashflow per share0.37 USD
Cash per share0.54 USD

Numis downgrades Beazley after hurricane loss estimates

Numis has downgraded specialist insurer Beazley (BEZG) after it updated investors on losses from the recent spate of hurricanes and the earthquake in Mexico.

Analyst Nick Johnson downgraded his recommendation from ‘add’ to ‘hold’ with a reduced target price of 525p on the shares, which fell 4p to 480.9p yesterday.

Beazley updated its catastrophic loss estimates to between $175 million and $275 million from hurricanes Harvey, Irma, and Maria, and the Mexico earthquakes.

‘We expect Beazley to benefit from likely rate increases in the property and reinsurance segments, albeit the earnings impact may not be apparent until 2019 due to lower reserve releases in 2018 following this year’s catastrophe losses,’ he said.

‘Our target price falls by 35p to 525p...with upside to our target price now being less than 10% our rating moves from “add” to “hold”.’

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Key stats
Market capitalisation£457m
No. of shares out212m
No. of shares floating202m
No. of common shareholdersnot stated
No. of employees3923
Trading volume (10 day avg.)m
Turnover£756m
Profit before tax£60m
Earnings per share28.16p
Cashflow per share36.85p
Cash per share33.00p

More challenges ahead for DFS, says Hargreaves

Furniture store DFS (DFSD) has reported a 22% profit slip and will need to work hard to stay in the black, according to Hargreaves Lansdown.

The shares fell 3.8% to 216.5p yesterday after the company announced profits of just £50.1 million for the first half of the year.

Although it maintained its final dividend of 7.5p per shares, it was hit by a double-whammy of slowing customer demand and rising costs due to weak sterling, said analyst Laith Khalaf.

‘Things don’t look like they are getting much easier either, with DFS expecting weak trading conditions to continue into the next financial year,’ he said.

‘Despite challenging conditions, DFS is still profitable, and has seen fit to pay both an ordinary and a special dividend this year. However, with both debt and dividends rising compared to earnings, DFS will need to turn more profits next year to keep its financial ratios in check.’

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Key stats
Market capitalisation£1,698m
No. of shares out536m
No. of shares floating527m
No. of common shareholdersnot stated
No. of employees598
Trading volume (10 day avg.)1m
Turnover£316m
Profit before tax£74m
Earnings per share13.40p
Cashflow per share18.41p
Cash per share8.14p

Peel Hunt: Moneysupermarket to take a hit from energy price cap

News that an energy price cap could be brought in as early as next week will impact Moneysupermarket (MONY), but Peel Hunt is sticking with its ‘buy’ rating.

Analyst Malcolm Morgan retained his target price of 370p on the shares, which were flat at 326.7p yesterday.

The government this week set out plans for an energy price cap that could come in next week but Morgan said although it generated headlines ‘as a solution, this is not a route many wanted’.

‘For Moneysupermarket, the main impact will probably be to disrupt the recovering collective switch marketplace, taking us back to the second quarter position,’ he said.

‘We had hoped that the recent improved collective switch news would set a much more positive tone for the second half of the year. This seems less certain today.’

Morgan added that recent price weakness ‘provides a good entry point’ but ‘the catalyst for near-term price recovery many now have slipped away’.

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Key stats
Market capitalisation£1,672m
No. of shares out241m
No. of shares floating239m
No. of common shareholdersnot stated
No. of employees1206
Trading volume (10 day avg.)1m
Turnover£121m
Profit before tax£224m
Earnings per share93.21p
Cashflow per share96.04p
Cash per share19.23p

‘Superior positioning’ at Unite, says Liberum

After a meeting with student accommodation company Unite (UTG), Liberum is feeling confident in its ‘buy’ rating.

Analyst John Mozley retained his target price of 770p on the shares, which rose 4p to 695p yesterday.

Mozley said a meeting with Liberum ‘focused on the quality of their established portfolio, relationships and operating platform which underpins their continued confidence in growth’.

He predicted Unite would generate a three-year earnings per share compound annual growth rate of 12%, ‘at the top end of this sector’.

‘The superior positioning and returns is available at a modest net asset value (NAV) discount… with a dividend per share yield of 3.6% growing at approximately 15% per annum.’

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