The Expert View: Lloyds, Aberdeen AM and Rolls Royce
Our daily roundup of analysts' share recommendations and commentary, also featuring Vectura and Oxford Instruments.
Our daily round-up of analyst recommendations and commentary, featuring Lloyds, Vectura, Aberdeen AM, Rolls Royce, and Oxford Instruments.
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| Key stats | |
|---|---|
| Market capitalisation | £115,074m |
| No. of shares out | 142,736m |
| No. of shares floating | 47,805m |
| No. of common shareholders | not stated |
| No. of employees | 113617 |
| Trading volume (10 day avg.) | 134m |
| Turnover | £23,535m |
| Profit before tax | £-1,427m |
| Earnings per share | -2.04p |
| Cashflow per share | 2.00p |
| Cash per share | 114.02p |
*Correct as at 13 Feb 2014
Shore Capital reiterates Lloyds as a ‘buy’
Full year results from Lloyds (LLOY.L) showed ‘momentum building’ according to Shore Capital analyst Gary Greenwood.
While the bank had already pre-announced its expectations for profit at £6.2 billion, there were some surprises.
‘The main difference to our expectations was a lower than expected statutory profits before tax result of £0.4 billion (against Shore Capital consensus of £1.4 billion) owing to negative fair value movements, volatile items and an additional £200 million of regulatory provisions for various issues that we had not factored in,’ Greenwood said.
The lower statutory profit meant that net asset value came in below consensus of 50.6p at 48.5p.
Regardless, Greenwood reiterated a ‘buy’ recommendation and a target price of 84p on the shares.
‘We believe that momentum is building in Lloyds as the economy recovers. This, coupled with a strong balance sheet, leads us to reiterate our positive stance.’
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| Key stats | |
|---|---|
| Market capitalisation | £523m |
| No. of shares out | 340m |
| No. of shares floating | 331m |
| No. of common shareholders | not stated |
| No. of employees | 216 |
| Trading volume (10 day avg.) | 0m |
| Turnover | £31m |
| Profit before tax | £-6m |
| Earnings per share | -1.77p |
| Cashflow per share | 0.42p |
| Cash per share | 20.96p |
*Correct as at 13 Feb 2014
Vectura becomes ‘sustainably profitable’: buy
Peel Hunt has reiterated its ‘buy’ recommendation for biotech firm Vectura (VEC.L) after it became ‘sustainably profitable’.
Analyst Stefan Hamill also increased the target price from 173p to 174p after Q3 results that ‘summarise the considerable commercial and pipeline success achieved’.
Hamill said: ‘Another upgrade tips our full year 2014 adjusted profit forecasts into positive territory and we now see Vectura as sustainably profitable, marking a significant milestone and important inflection point in the life of any biopharma company.
‘From here we see the earnings trajectory as steep, driving earnings multiples down quickly and further widening interest in the Vectura story.’
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| Key stats | |
|---|---|
| Market capitalisation | £4,893m |
| No. of shares out | 1,200m |
| No. of shares floating | 851m |
| No. of common shareholders | not stated |
| No. of employees | 2062 |
| Trading volume (10 day avg.) | 8m |
| Turnover | £1,079m |
| Profit before tax | £308m |
| Earnings per share | 26.22p |
| Cashflow per share | 34.21p |
| Cash per share | 44.56p |
*Correct as at 13 Feb 2014
Follow the leader and sell Aberdeen, says Jefferies
Jefferies has downgraded Aberdeen Asset Management (ADN.L) from ‘hold’ to ‘underperform’ as the analysts’ lose faith in the asset manager’s takeover of Swip.
Analyst Jason Streets also cut the target price from 430p to 350p and urged investors to ‘follow the leader’ and sell their shares.
‘We do not believe that the Swip deal will achieve its stated aims nor will it compensate for the slowdown in the group’s powerhouse,’ he said. ‘The chief executive of Aberdeen sold a substantial number of shares just 16 days after announcing the deal to acquire Swip; we urge investors to follow his lead.’
Streets noted the poor performance of Aberdeen’s global equity funds as ‘cause for concern’ and said that while it spent £900 million on deals to grow its property and fixed income solution it ‘has a poor return to show for it’.
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| Key stats | |
|---|---|
| Market capitalisation | £19,264m |
| No. of shares out | 1,880m |
| No. of shares floating | 1,868m |
| No. of common shareholders | not stated |
| No. of employees | 55600 |
| Trading volume (10 day avg.) | 5m |
| Turnover | £12,161m |
| Profit before tax | £2,307m |
| Earnings per share | 122.97p |
| Cashflow per share | 149.68p |
| Cash per share | 138.65p |
*Correct as at 13 Feb 2014
Rolls Royce’s order book makes it a long term buy
Revenues may be flat for Rolls Royce (RR.L) at the moment but Liberum analysts said the ‘formidable’ order book means it is still a strong long term play.
Analyst Ben Bourne retained a ‘buy’ recommendation and target price of £13.40.
Rolls Royce reported full year 2013 profits before tax in line but a 5% drop in earnings per share due to higher tax and revised guidance of flat revenue and profit growth means Jefferies will have to cut its 2014 full year profit prediction by 10%.
However, the order book makes up for any falls as it is up 19% to £71.6 billion, Bourne said.
The market didn’t take well to Rolls’ update, with shares falling over 10% on Thursday morning to around £10.50.
‘We remain attracted to Rolls Royce’s leadership position on the next generation of wide-body aircraft, ability to improve cash conversion and a powerful order book but acknowledge short-term weakness to reflect revised full year 2014 earnings,’ said Bourne.
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| Key stats | |
|---|---|
| Market capitalisation | £866m |
| No. of shares out | 57m |
| No. of shares floating | 53m |
| No. of common shareholders | not stated |
| No. of employees | 1927 |
| Trading volume (10 day avg.) | 0m |
| Turnover | £351m |
| Profit before tax | £21m |
| Earnings per share | 36.97p |
| Cashflow per share | 76.23p |
| Cash per share | 68.87p |
*Correct as at 13 Feb 2014
Oxford Instruments may fall but keep hold of shares
Scientific instruments maker Oxford Instruments’ (OXIG.L) acquisition of Andor Technology has led Investec to reinitiate a ‘hold’ recommendation.
Analyst Michael Blogg placed a target price of £14.00 on the shares even though he expected the shares to fall slightly in the short term.
‘Oxford has built a strong platform, serving end markets with good long-term prospects, and we consider that Andor is a good addition to this,’ said Blogg. ‘Current trading remains challenging, although the interim management statement reports gently improving order intake trends. However, due to FX headwinds…and generally weak conditions, we expect consensus expectations to be revised lower (significantly in outer years).‘We reinitiate with a ‘hold’, with downside risk, on the expectation of the share price failing [on Thursday].’
Blogg added that the ‘hold’ recommendation factored in any falls.
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