The Expert View: Lloyds, Schroders and Countrywide
Our daily roundup of the best analyst commentary on shares, also including Carillion and Intu Properties.
Lloyds still a 'buy' after Libor fine
Investec analyst Ian Gordon believes the market is right to have shrugged off the Lloyds’ (LLOY) £218 million fine for Libor rigging and says yesterday’s first-half results show ‘further solid underlying performance’.
Analyst Ian Gordon retained a ‘buy’ rating and target price of 85p on the shares following results announced in the week the City watchdog fined the taxpayer-backed bank and the Bank of England called its part in the Libor-rigging scandal ‘reprehensible’. Shares fell 2.8% to 74.3p yesterday.
‘The market has, quite rightly in our view, taken the disclosure of Lloyds’ “reprehensible” Libor manipulation and immaterial £0.2 billion fine in its stride,’ said Gordon. ‘What drives the share price is the operational performance, and the Q2 2014 results show further solid underlying progress – profit before tax of £2 billion is a £200 million beat against consensus.
He added that the need to add a further £600 million to the pot for payment protection insurance mis-selling redress ‘offers relief rather than alarm’.
Schroders’ shareholders cheer at 50% divi hike
Results from asset management firm Schroders (SDR) were ‘relatively upbeat’ but shareholders will be more interested in the surprise boost to dividends.
Barclays analyst Daniel Garrod retained an ‘overweight’ recommendation on the stock and target price of £31.00 after the ‘unexpected positive’ of a 50% dividend hike. Shares fell 4.4% to £23.90 on news of the results yesterday.
‘The highlight is a 50% increase in interim dividend per share to 24p with management indicating their intention to improve phasing interim versus final dividend and increase to full-year payout ratios,’ he said.
‘Q2 flows of only £1 billion versus £3.8 billion for the prior quarter is disappointing even after redemptions from institutional commodities funds had been flagged. Outlook appears relatively upbeat highlighting strong retail flows for July and better institutional pipeline.’
‘Too cheap’ Countrywide upgraded by Numis
Estate agent Countrywide (CWD) has been upgraded after strong results and news of plans for enhanced dividends.
Numis analyst Chris Millington upgraded his recommendation from ‘add’ to ‘buy’ and retained a target price of 690p on the shares after interim results that were ahead of his forecasts. Shares jumped 3.1% to 531.1p yesterday on the news.
‘Countrywide’s interims are strong…but we will leave estimates unchanged to reflect a greater H1 bias to results in 2014 than has been the case in the last few years,’ he said. ‘However, the main news is that the group is enhancing its dividend pay-out strategy which we estimate will lead to a total dividend yield between 6% and 7% in 2015 – before special pay-outs form the sale of Zoopla shares.
‘We raise our recommendation to ‘buy’ arguing that the shares are too cheap given the strength of cash generation and earnings growth.’
Carillion calls off Balfour merger but could go back to bid
News that Carillion (CLLN) and Balfour Beatty (BBY) have called off merger talks was welcomed by Jefferies analyst Anthony Codling.
He retained a ‘buy’ rating on Carillion shares and a target price of 518p after talks broke down. Shares fell 5.4% to 334.3p yesterday.
‘Apparently there was a change of heart from Carillion with respect to [Balfour’s engineering and design arm] Parsons Brinckerhoff. Carrillion wants Parsons to be included and Balfour wants to continue,’ he said. ‘We welcome the news…We believe Parsons to be the jewel in the crown and believe that Balfour should be sold as the sum of its parts rather than in parts.’
Codling added that he ‘would not be surprised if Carillion made a play for the whole of Balfour’ but ‘due diligence during a hostile bid adds a level of complexity’.
Intu still just a ‘hold’ despite vaulation boost
Peel Hunt won’t budge on its ‘hold’ recommendation for Intu Properties (INTUP) despite the shopping centre owner reporting a 7.6% jump in the valuation of its properties.
Analyst Kate Renn upped her target price on the stock, a recent entrant to the FTSE 100, from 300p to 340p, arguing the share price was likely to rise, but said its assets were not ‘high growth’. Shares rose 2.7% to 328.8p yesterday.
‘Following Hammerson’s 6.6% shopping centre valuation gain in H1, Intu reports an unexpectedly strong 7.6% uplift – no doubt supported by Land Securities’ recent purchase of Bluewater at a low 4.1% yield,’ she said.
‘There is going to be some appreciation in the shares from here now they trade on a 14% net asset value discount but we are not changing our “hold” stance because we don’t believe these are high growth assets.’