The Expert View: Icap, UBM and Big Yellow
Our daily roundup of the best analyst commentary on shares, also including Euromoney and Speedy Hire.
Icap plagued by tough markets and investigations
Interdealer broker Icap (IAP) is still fighting against challenging market conditions and ongoing investigations.
Icap has been charged by European antitrust authorities with ‘facilitating’ cartels to manipulate two Japanese currency-denominated benchmarks, while US authorities are probing Icap’s role in the possible manipulation of the Isdafix swaps benchmark.
Numis analyst James Hamilton retained a ‘sell’ recommendation and target price of 303p on the shares, which were trading at 355.7p yesterday, as the group revealed revenue was down 19% year-on-year in the three months to June.
‘Tough market conditions continue to impact trading activity in global broking and electronic broking services markets. Global broking revenues declined 25% year-on-year as it continues to be adversely impacted by a combination of both structural and cyclical factors including bank deleveraging, on-going regulatory uncertainty and lack of interest rate and foreign exchange volatility,’ he said.
‘These results may lead to another downgrade of estimates. We believe the ongoing investigations into Icap combined with the notable penalties being handed out to other financial institutions demonstrate sustainable operational risk and we maintain our “sell” recommendation.’
Euromoney under review after disappointing trading statement
Investec is expecting mid-term growth at business magazine publisher Euromoney Institutional Investor (ERM).
Analyst Steve Liechti retained a ‘buy’ recommendation but put the £15 target price under review after a ‘slightly disappointing’ third quarter trading update. Shares were trading at £10.67 yesterday.
‘The statement itself is slightly disappointing in our view versus the first half of the year with subscriptions still growing modestly, events flat and advertising down quite heavily again,’ said Liechti. ‘Shares may drift…but we remain at “buy” for quality operators with mid-term growth upside on recovery/investment in systems.’
He added the outlook was ‘still challenging’ as there was no improvement in currency pressure and although advertising trends were ‘not good’ forward booking for events looked encouraging.
UBM a ‘hold’ as it faces rising costs and pressure from China
Peel Hunt is expecting marketing business UBM (UBM) to report a 9% reduction in revenue when it publishes its interim results on 1 August.
Analyst Malcolm Morgan maintained a ‘hold’ recommendation but reduced the target price to 680p from 720p. Shares were trading at 654.5p yesterday.
‘We look for a 9% reduction in revenue to £356.7 million and a 4% reduction in profit before tax to £64.2 million. We also trim our 2015 forecasts by 6% to reflect current exchange rates alongside the increasing cost of IT amortisation,’ he said.
‘Rising investment in IT alongside rising competitive pressure in the key Chinese markets are unfortunately coinciding with ongoing currency headwind. Hold for the moment.’
Speedy Hire recovery accelerating
A recovery is under way at Speedy Hire (SDY) as the tool hire company makes a strong start to full-year 2015.
Liberum analyst David Brockton retained a ‘hold’ rating and a target price of 60p on the shares as the company announced revenue growth of 15.7%, tracking ahead of his expectations of a 5.8% jump. Shares rose more than 6% yesterday to 56.3p.
‘Although this growth is flattered by a weak prior year comparator, should current momentum continue then risk to forecasts will be to the upside as the year progresses,’ he said.
‘Growth has accelerated in the UK and Ireland, with improving trends for core hire. The business also remains on track to reduce international losses.’
Brockton added the company’s UK recovery was ‘gaining pace’ as it benefits from construction spending in the housing market.
Underlying momentum stored up at Big Yellow
The management of storage facility Big Yellow (BYG) may have tempered their outlook for 2014 but there is still underlying momentum at the company, says Jefferies.
Analyst Robert Duncan retained a ‘buy’ rating and a target price of 597p on the shares, which were trading at 501p yesterday, based on strong occupancy and rent increases.
‘Management’s outlook with its full-year 2014 results was decidedly more measure than the outlook with its results for the first half of its financial year, but the gains in both occupancy and rate through the first quarter suggest that underlying momentum is strong,’ he said.
‘While the first quarter is historically the strongest, management expects to deliver further gains through the second quarter.’