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The Expert View: Kingfisher, Hikma and Allied Minds

Our daily roundup of analyst commentary on shares, also including Marshalls and ZPG.

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Key stats
Market capitalisation£6,443m
No. of shares out2,188m
No. of shares floating2,174m
No. of common shareholdersnot stated
No. of employees77000
Trading volume (10 day avg.)8m
Turnover£11,225m
Profit before tax£610m
Earnings per share26.96p
Cashflow per share38.14p
Cash per share35.49p

No bright spots for Kingfisher investors, says Hargreaves

There are few ‘bright spot’ in the latest results from B&Q and Screwfix owner Kingfisher (KGF), as the ‘One Kingfisher’ transformation plan appears to stutter.

A 10.8% jump in sales at Screwfix was not enough to rescue performance for the quarter, which saw sales fall 1.9% across the group, with B&Q and French chains Castorama and Brico Depot all registering falls. The shares fell 4.7% to 294.6p yesterday on the news.

That’s despite efforts by chief executive Veronique Laury to revamp the company by cost cutting, improving product sourcing and online operations and expanding the Screwfix business.

Analyst George Salmon said it was sometimes hard ‘to get a grip on the underlying direction of travel at Kingfisher, so dependant is the group on the vagaries of weather’.

‘However, with the transformative One Kingfisher plan suffering from disruption and like-for-like sales in both France and the UK in negative territory, there aren’t many bright spots for investors in these results,’ he said.

‘A silver lining of sorts is that it looks like Kingfisher isn’t alone in having difficulties in the UK. The group’s flagship B&Q chain saw like-for-like sales fall 4.7%, which is similar to the 4.3% fall at Bunnings UK, the new owner of Homebase.’

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Key stats
Market capitalisation£2,940m
No. of shares out241m
No. of shares floating132m
No. of common shareholdersnot stated
No. of employees8339
Trading volume (10 day avg.)1m
Turnover1,513m USD
Profit before tax120m USD
Earnings per share0.51 USD
Cashflow per share0.90 USD
Cash per share0.50 USD

Hikma shares only ‘optically cheap’, says Peel Hunt

Shares in Hikma Pharmaceuticals (HIK) fell after the company lowered its guidance for 2017 generics sales which Peel Hunt said would weigh despite the shares remaining ‘optically cheap’.

Analyst Amy Walker retained her ‘hold’ recommendation and target price of £21.50 on the stock after it trimmed its guidance for 2017 revenue to $2 billion due to a weaker outlook for the generics business.

The news sparked a 9.9% slump in the shares to £11.92 yesterday.

Walker said she was likely to cut her 2017 earnings expectations for the group by 7%.

‘Investor sentiment on generics remains subdued and though Hikma’s valuation is undemanding, we see few catalysts for outperformance given lingering worries over the mid-term outlook,’ she said.

Walker also noted a lack of news on the launch of its generic asthma drug, a version of GlaxoSmithKline’s Advair treatment.

‘Though Hikma remains optically cheap despite the implied forecast cuts, we expect [the] results to continue to weigh on sentiment, and we remain at “hold”,’ she added.

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Key stats
Market capitalisation£383m
No. of shares out238m
No. of shares floating215m
No. of common shareholdersnot stated
No. of employees413
Trading volume (10 day avg.)m
Turnover2m USD
Profit before tax-75m USD
Earnings per share-0.34 USD
Cashflow per share-0.44 USD
Cash per share0.74 USD

Impact of Allied Minds write-downs disappointing, says Jefferies

The write-downs and subsequent cull at Allied Minds (ALML), which specialises in commercialising intellectual property from universities, in April has failed to translate into gains, says Jefferies.

Analyst Ken Rumph retained his ‘underperform’ recommendation and target price of 124p on the shares, which edged half a penny lower to 160p yesterday.

‘After the write-offs in April under new chief executive Jill Smith, it’s slightly disappointing that the “tail” generated around $22 million of write-downs to offset gains from rounds in larger companies,’ he said.

He noted that cash reduced by $49 million and ‘a burn rate of c.$100 million per annum appears likely to rise’.

Although the shares currently trade at a 6% discount to net asset value, Rumph said ‘our concern remains that the largest companies are fully valued’.

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Key stats
Market capitalisation£825m
No. of shares out199m
No. of shares floating188m
No. of common shareholdersnot stated
No. of employees2250
Trading volume (10 day avg.)m
Turnover£397m
Profit before tax£37m
Earnings per share18.61p
Cashflow per share25.24p
Cash per share10.37p

Numis predicts special dividend from Marshalls

A strong cash position at landscaping materials company Marshalls (MSLH) could lead to acquisitions, or even a special dividend, says Numis.

Analyst Chris Millington retained his ‘add’ recommendation and target price of 435p on the shares following half-year results that led him to ‘marginally increase’ estimates for 2017/18 to ‘reflect an acceleration in revenue growth’.

‘Cash generation in the first half was… exceptionally strong, which positions the group well for acquisitions and / or special dividends,’ he said.

‘We retain the view that Marshalls looks well placed to continue showing strong cash-backed earnings growth.’

The shares jumped 3.9% to 413.5p yesterday.

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Key stats
Market capitalisation£106m
No. of shares out30m
No. of shares floating22m
No. of common shareholdersnot stated
No. of employeesn/a
Trading volume (10 day avg.)m
Turnover£1m
Profit before tax£m
Earnings per share-1.39p
Cashflow per sharen/a
Cash per share1.98p

Opportunities for cross-selling at ZPG, says Liberum

A product demonstration from Zoopla and USwitch owner ZPG (ZPG) has convinced Liberum the company has multiple opportunities for cross-selling.

Analyst Ian Whittaker reiterated his ‘buy’ recommendation and target price of 450p on the shares, which edged 2p higher to 356p yesterday.

‘Our key takeaway from the product demonstration is that ZPG has assembled a collection of assets that when fully integrated could provide a user experience that keeps consumers within its ZPG product suite to find, move and manage their new home,’ he said.

‘This will present multiple opportunities to monetise the consumer and ZPG’s property partners through providing the services to both stakeholders.’

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