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The Expert View: Ocado, Standard Chartered and Henderson

Our daily roundup of the best analyst commentary on shares, also including St Modwen Properties and Hogg Robinson.

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Key stats
Market capitalisation£2,078m
No. of shares out585m
No. of shares floating392m
No. of common shareholdersnot stated
No. of employees5742
Trading volume (10 day avg.)2m
Profit before tax£-12m
Earnings per share-2.16p
Cashflow per share5.19p
Cash per share18.97p

*Correct as at 1 Jul 2014

‘Huge’ long-term potential for Ocado, says Numis

Online supermarket Ocado (OCDO) has been upgraded after a strong set of half-year results against a challenging backdrop.

Numis analyst Andrew Wade upgraded the stock from ‘add’ to ‘buy’ and retained a target price of 500p on the shares, which closed yesterday down 5% at 352.8p

Although he was upbeat about Ocado’s prospects he lowered estimates for earnings from £75 million to £71 million for the full year ‘to reflect the more challenging trading environment, a more second half-weighted marketing spend, increased IT headcount and some investment in strategic initiatives’.

‘Nevertheless, we are encouraged by the sold first half result, a stronger top-line exit rate, and progress on CFC3 [its third logistics centre]; we continue to see huge long-term potential as Ocado leverages its market-leading intellectual property.’

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Key stats
Market capitalisation£29,419m
No. of shares out2,469m
No. of shares floating2,458m
No. of common shareholdersnot stated
No. of employees86640
Trading volume (10 day avg.)6m
Turnover10,286m USD
Profit before tax2,332m USD
Earnings per share0.95 USD
Cashflow per share1.15 USD
Cash per share13.14 USD

*Correct as at 1 Jul 2014

Standard Chartered is cheap but don’t buy in just yet

A profit warning last week has hit the share price of Standard Chartered (STAN), leading Jefferies to downgrade its 2015 and 2016 estimates.

After the bank warned last week that full-year profits would be down 20% on last year, Jefferies analyst Joseph Dickerson placed an ‘underperform’ rating on the shares and a target price of £10.00. Shares were trading at £11.93 at yesterday's close.

Dickerson downgraded profit estimates for 2015 and 2016 by 5% and 3% respectively and said he was unsure about where the bank goes from here.

‘Standard Chartered’s 34% pull back from March 2013 looks potentially enticing given its historical return profile and enviable foot print,’ he said. ‘However, we continue to rate the shares “underperform” given that consensus estimates are likely to fall meaningfully – we are 11% below the street in 2014 and 12% in 2015 and we think investors are too sanguine with regards to prospective credit deterioration.’

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Key stats
Market capitalisation£2,784m
No. of shares out1,132m
No. of shares floating1,110m
No. of common shareholdersnot stated
No. of employees1029
Trading volume (10 day avg.)1m
Profit before tax£107m
Earnings per share9.43p
Cashflow per share14.27p
Cash per share20.97p

*Correct as at 1 Jul 2014

Henderson acquisition of Geneva ‘fair but not cheap’

Henderson Group’s (HGGH) acquisition of Geneva Capital is a fair but ‘not cheap’ deal for the fund group, according to Barclays.

Analyst Daniel Garrod retained an ‘underweight’ recommendation and target price of 210p on the shares following the acquisition of the Milwaukee-based asset manager for an initial consideration of $130 million, rising to a possible $200 million. Shares in Henderson were trading at 245.6p at yesterday's close.

Garrod said he believed the acquisition was ‘fairly priced but not cheap’ although it would help Henderson achieve its goal of expanding distribution in the US.

‘A concern of this acquisition could be that Geneva appears to have negative assets under management momentum in 2014,’ said Garrod. ‘Geneva assets under management rose strongly in 2013 but in 2014 have declined by 6% to $6.3 billion. This could be performance related due to their mid-cap growth bias.’

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Key stats
Market capitalisation£822m
No. of shares out221m
No. of shares floating177m
No. of common shareholdersnot stated
No. of employees255
Trading volume (10 day avg.)0m
Profit before tax£72m
Earnings per share32.88p
Cashflow per share33.92p
Cash per share3.36p

*Correct as at 1 Jul 2014

Pull-back in St Modwen shares equals a buying opportunity

Momentum has picked up for property company St Modwen (SMP), spurred on by a recovery in regional development.

Liberum analyst Jon Stewart retained a ‘buy’ rating and target price of 432p on the shares following its interim trading statement.

‘St Modwen’s interims show momentum across the business, with recovery in regional development and secondary property values,’ he said. ‘Demand is increasing for both residential land and finished units, while major commercial developments are on track.' Shares in the company yesterday jumped 3.5% to 371.1p on the news.

‘6% net asset value growth in the first half of the year accelerates to 20% per annum over the next two years on our forecasts. Following a 15% pull-back over the last three months… [this] represents a buying opportunity.’

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Key stats
Market capitalisation£236m
No. of shares out324m
No. of shares floating153m
No. of common shareholdersnot stated
No. of employees4868
Trading volume (10 day avg.)0m
Profit before tax£17m
Earnings per share5.09p
Cashflow per share9.72p
Cash per share13.08p

*Correct as at 1 Jul 2014

Look past profit figures at undervalued Hogg Robinson

Corporate services provider Hogg Robinson (HRG) is undervalued despite an expected decline in profit next year.

Charles Stanley analyst Andy Smith reiterated his ‘buy’ rating and a target price of 100p on the company, which provides travel, expense and data management. Shares were trading at 72.3p at yesterday's close.

‘On a price-earnings rating of 9.9 times and offering a yield of 3.1% for full-year 2015, Hogg Robnison remains undervalued,’ he said. ‘While the profit before tax is expected to decline in full-year 2015, this should not detract investors from a company which has successfully managed substantial change, yet at the same time has improved earnings before interest and tax (EBIT) and EBIT margins in each of the last four years.’

Smith added that Hogg’s pension deficit could also be eliminated by 2016 as interest rates increase.

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