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The Expert View: ITV, Aberdeen Asset Management and Interserve

Our daily roundup of the best analyst commentary on shares, also including McBride and AFH Financial.

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Key stats
Market capitalisation£7,191m
No. of shares out4,025m
No. of shares floating3,691m
No. of common shareholdersnot stated
No. of employees4257
Trading volume (10 day avg.)12m
Profit before tax£326m
Earnings per share8.05p
Cashflow per share10.22p
Cash per share12.87p

*Correct as at 30 Jun 2014

ITV coverage reinitiated with as a ‘buy’ as Peel Hunt praises divi payouts

Peel Hunt has reinitiated coverage of ITV (ITV) which a positive note on its earnings per share outlook and dividend potential.

Analyst Alex DeGroote reinitiated his rating at a ‘buy’ and with a target price of 250p on the shares, which were trading at 178.2p at yesterday's close.

‘We like ITV in terms of earnings per share upgrade potential, both in terms of operational gearing and utilising a strong a balance sheet,’ he said. ‘In recent years, the company has also paid a special dividend on two occasions, and this illustrates the approach to shareholder value. ITV continues to deliver very large mass market UK audiences, and we believe this justifies a strategic premium.’

DeGroote said the company was ‘shareholder-friendly’ thanks to the dividends.

Key stats
Market capitalisation£5,967m
No. of shares out1,314m
No. of shares floating966m
No. of common shareholdersnot stated
No. of employees2062
Trading volume (10 day avg.)3m
Profit before tax£308m
Earnings per share26.22p
Cashflow per share34.21p
Cash per share44.56p

*Correct as at 30 Jun 2014

Aberdeen starts to turn around poor share price performance

Poor share performance at Aberdeen Asset Management (ADN) is starting to turn around as sentiment towards emerging markets starts to improve again.

Barclays analyst Daniel Garrod reiterated his ‘overweight’ recommendation and increased the target price from 490p to 510p. Shares were trading at 453.9p at yesterday's close.

‘Aberdeen offers good value at 12 times 2015 price earnings for recovering flow and performance in our view,’ he said. ‘The Aberdeen share price remains the worst performing year to date among our listed UK asset manager coverage universe. However, it has started recovering.

‘Industry flows suggest a turn in sentiment towards emerging markets from the end of March onwards.’

Aberdeen recorded £8.8 billion of outflows in March but ‘we are encouraged that management highlight positive flows in April, save one large sovereign wealth redemption’, added Garrod.

Key stats
Market capitalisation£861m
No. of shares out144m
No. of shares floating138m
No. of common shareholdersnot stated
No. of employees25383
Trading volume (10 day avg.)0m
Profit before tax£50m
Earnings per share38.16p
Cashflow per share74.20p
Cash per share44.87p

*Correct as at 30 Jun 2014

Interserve upgraded as share price drops back

Construction company Interserve (IRV) has been upgraded as recent share price weakness provides an opportunity to ‘buy’.

Numis analyst Howard Seymour upgraded his recommendation from ‘add’ to ‘buy’ and retained a target price of 718p. Shares were trading at 600p at yesterday's close.

Although the market responded well to Interserve’s acquisition of Initial Facilities in February the share price has fallen back to the point when the deal was announced.

‘We believe this is not justified – the positive organic growth profile for the group coupled with the attractions of Initial Facilities (including 15% full year earnings-per-share enhancement) remain key drivers of above average sector growth,’ said Seymour.

‘Moreover the better earnings base resulting from Initial Facilities are not reflected in a price earnings and yield valuations which now stand at a discount to more cyclical building contractors.’

Key stats
Market capitalisation£174m
No. of shares out182m
No. of shares floating180m
No. of common shareholdersnot stated
No. of employees4898
Trading volume (10 day avg.)0m
Profit before tax£6m
Earnings per share3.01p
Cashflow per share16.67p
Cash per share2.69p

*Correct as at 30 Jun 2014

McBride plans 400 job cuts as part of ‘rationalisation’ plan

Household products maker McBride (MCB) has provided further details of its rationalisation plan that will improve returns in the UK.

Investec analyst Nicola Mallard has retained an ‘add’ rating and target price of 100p on news that McBride, which owns the Oven Pride brand, is looking to reduce its workforce by 25%. The job losses, which could total 400, will hit the manufacturing sites but not entail site closures and is expected to cost £14 million while crating savings of £12 million by June 2016.

‘McBride’s pre-close [trading statement] has confirmed an unchanged outlook for full year 2014, but also provides more detail around the company’s latest rationalisation plans, which are centred on improving returns in the UK,’ said Mallard.

‘The cash costs are not excessive and look set to yield a good and relatively quick rate of payback. As the balance sheet can comfortably accommodate these figures, we continue to forecast a maintained dividend for full year 2014.’

Shares were trading at 96.3p at yesterday's close.

AFH joins AIM to boost brand and support growth

Midlands-based independent financial adviser AFH Group (AFHP) has graduated to AIM from the small company ISDX exchange as management indicates further acquisitions are on the way.

Allenby Capital analyst Myles McNulty left his forecasts for the group unchanged but reduced his ‘fair value’ for the shares from 210p to 202p.

AFH, headed by chief executive Alan Hudson (pictured), is joining AIM after three years on ISDX, having raised £1.46 million of new equity at a placing price of 140p in the process. McNulty said it was an ‘opportune’ time to move to AIM which has a higher profile, broader investor base, greater liquidity and access to institutional investors.

‘Specifically to AFH, management hopes that the AIM listing will provide support to the group’s brand and enhance the perceived credentials of the group with existing and potential clients,’ he said. ‘The AIM listing will moreover enhance the acquisitive capabilities of AFH, both via the potential to raise new monies through equity placings and through the issuance of new shares.’

Although the ‘acquisitive side of the group’s growth strategy has decelerated of late…management has indicated that its pipeline of prospective acquisitions remains strong’, said McNulty.

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