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The Expert View: Johnson Matthey, GlaxoSmithKline and Kier

Our daily roundup of analyst commentary on shares, also including Miton and Keller.

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If you would like to receive news alerts on any of the stocks mentioned in The Expert View, click on the star icons below to add them to your favourites.

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Key stats
Market capitalisation£6,299m
No. of shares out194m
No. of shares floating189m
No. of common shareholdersnot stated
No. of employees12214
Trading volume (10 day avg.)1m
Turnover£12,031m
Profit before tax£386m
Earnings per share200.83p
Cashflow per share289.49p
Cash per share174.60p

Johnson Matthey shrugs off diesel debate, says Morgan Stanley

Morgan Stanley is confident of chemicals specialist Johnson Matthey’s (JMAT) riposte to fears it will be impacted by a clampdown on the use of diesel.

Analyst Charles Webb retained his ‘overweight’ recommendation and target price of £35.00 on the stock after the company confirmed it will invest £200 million into battery material technology.

Shares in the company, which makes catalytic converters for cars, were up 13.6% at £33.60 at the time of writing.

‘We think Johnson Matthey has delivered a confident riposte to fears over its terminal growth given the diesel debate at the heart of the investment case,’ he said.

He noted that targets have been maintained and cost cutting is underway, as well as the £200 million investment into nickel rich battery material in a market that could be worth $30 billion.

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Key stats
Market capitalisation£72,044m
No. of shares out4,919m
No. of shares floating4,860m
No. of common shareholdersnot stated
No. of employees99827
Trading volume (10 day avg.)11m
Turnover£27,889m
Profit before tax£912m
Earnings per share18.60p
Cashflow per share57.77p
Cash per share101.55p

‘Hold’ onto Glaxo on inhaler trial success, says Deutsche

Trial success for GlaxoSmithKline’s (GSK) triple therapy inhaler should assuage fears over generic competition to the pharmaceutical giants Advair lung drug, according to Deutsche Bank.

Analyst Richard Parkes retained his ‘hold’ recommendation and target price of £16.10 on the stock, which was trading up 0.8%, or 11.3p, at £14.65 at the time of writing.

The ‘Impact’ study confirms the potential for GSK’s once-daily inhaler Trelegy Ellipta, which it hopes will go some way to offsetting the losses caused by generic competition to its older lung drug Advair.

Parkes said it put the drug maker ‘in a strong position to capitalise on this’.

‘Although the applicability to a broad population of patients is difficult to determine, it provides robust evidence to support the clinical benefits of triple therapy in patients experiencing exacerbations despite maintenance therapy,’ he said.

‘The results reassure us over our forecasts that GSK can modestly grow its overall respiratory franchise, despite pricing pressure and entry of Advair generics.’

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Key stats
Market capitalisation£1,137m
No. of shares out97m
No. of shares floating92m
No. of common shareholdersnot stated
No. of employees20685
Trading volume (10 day avg.)1m
Turnover£3,988m
Profit before tax£-25m
Earnings per share-25.74p
Cashflow per share27.21p
Cash per share213.18p

Kier shares are too cheap, says Numis

Sluggish sentiment around the construction and property sector has had a knock-on impact on Kier (KIE) but Numis says the company has no issues and the shares are too cheap.

Analyst Howard Seymour reiterated his ‘buy’ recommendation and target price of £15.10 on the stock, after it reported an 8% profit rise in the first half. The shares were trading up 6.5%, or 71.5p, at £11.66 at the time of writing.

‘Kier shares have been hit by sentiment relating to issues in the wider sector, though full-year results and confidence about the outlook indicate Kier has no such issues,’ said Seymour.

‘Indeed, we believe the merits of Kier’s integrated model will show through after a period of transition so that investors should expect annual double-digit earnings growth as the fruits of this strategy drive organic growth out to 2020.’

He said based on the opportunities ‘the shares are too cheap - notably shown by the fact that the yield [of 5.5%] is double that of the sector’.

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Key stats
Market capitalisation£69m
No. of shares out171m
No. of shares floating107m
No. of common shareholdersnot stated
No. of employees51
Trading volume (10 day avg.)m
Turnover£24m
Profit before tax£3m
Earnings per share1.92p
Cashflow per share2.14p
Cash per share11.99p

Miton looks cheap, says Peel Hunt

The valuation of Miton Group (MGRM) is still underestimating the prospects for the investment manager, according to Peel Hunt.

Analyst Stuart Duncan retained his ‘buy’ recommendation and target price of 50p on the shares following first half results that he said ‘clearly demonstrate the momentum that Miton is delivering’.

Assets were up 15% to almost £3.5 billion and while profits of £2.9 million were down on the same period last year, they were up on the second half of 2016. The shares rose 2.7% to 40.6p yesterday.

‘Miton is currently enjoying a period of positive momentum with increased diversification of the business beneficial to the longer-term prospects,’ said Duncan.

‘The group’s valuation continues to underestimate the prospects of the business - the December 2018 embedded value/net operating profit after tax rating of 8.7x is a significant discount to others in the sector.’

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Key stats
Market capitalisation£596m
No. of shares out72m
No. of shares floating69m
No. of common shareholdersnot stated
No. of employees10237
Trading volume (10 day avg.)m
Turnover£1,780m
Profit before tax£47m
Earnings per share64.75p
Cashflow per share165.98p
Cash per share117.22p

Keller’s £50m benefits target is conservative, says Jefferies

Engineering company Keller (KLR) is targeting £50 million of gross benefits by 2020 but Jefferies believes this could be on the conservative side.

Analyst Anthony Codling retained his ‘buy’ recommendation and target price of £13.80 after ‘digesting’ a capital markets day handout from the company, which he said was ‘worth the effort’.

‘The group has put a lot of flesh on the bones of the previously announced targeted £50 million of annualised gross benefits by 2020,’ he said.

‘On reflection, we believe £50 million to be at the conservative end of the range of possible outcomes.’

He added that Keller was a global leader in a growing market with a ‘current addressable market worth $25 billion’ and ‘the total global ground engineering market coming in at twice that’.

‘Keller has yet to enter China, Korea, Japan, and Russia, but should it decide to its high-tech offering could be attractive set against the low-tech incumbents. There are clearly challenges between Keller and the attainment of their £50 million target, it is by no means a walk in the park, however, Keller is...aware of the pitfalls on the way.’

Shares were trading 1.9%, or 15.6p, at 830.1p at the time of writing.

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