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The Expert View: PureCircle, Friends Life & WH Smith

Our roundup of the best analyst commentary on shares, including NewRiver Retail and Trinity Mirror.

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Key stats
Market capitalisation£1,005m
No. of shares out165m
No. of shares floating49m
No. of common shareholdersnot stated
No. of employees758
Trading volume (10 day avg.)0m
Turnover42m USD
Profit before tax-6m USD
Earnings per share-0.03 USD
Cashflow per share-0.01 USD
Cash per share0.18 USD

*Correct as at 11 Jun 2014

Coca-Cola makes life sweet for PureCircle

Numis has upgraded PureCircle (PURE) on reports that Coca-Cola is launching a new product containing stevia, its natural sweetener.

Coca-Cola Life has been piloted in Argentina and Chile and will be launched in Britain in September. It is said to contain 36% fewer calories than regular Coca-Cola, and 37% less sugar. PureCircle is expected to provide the sweetener for the new drink in this country.

Analyst Charles Pick raised the stock from ‘reduce’ to ‘hold’ with a target price of 600p. The shares closed 1% or 6p higher at 608.7p.

‘We believe that PureCircle will be the supplier of the [stevia] and industry sources suggest this will be on an exclusive basis,’ said Pick. ‘This will be the first new Coca-Cola brand in GB since Coca-Cola Zero in 2006.’

Pick added: ‘This is good news for PureCircle as it seeks to ensure that the use of stevia becomes mainstream.’

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Key stats
Market capitalisation£4,689m
No. of shares out1,418m
No. of shares floating1,405m
No. of common shareholdersnot stated
No. of employees3872
Trading volume (10 day avg.)3m
Turnover£10,989m
Profit before tax£204m
Earnings per share14.38p
Cashflow per share50.96p
Cash per share353.30p

*Correct as at 11 Jun 2014

Friends Life’s 6.5% yield impresses Barclays

Alan Devlin of Barclays Capital continues to believe there is a buying opportunity in Friends Life (FLG) as shares in the pension and savings provider yield 6.5%, the fifth highest in the FTSE 100.

Friends Life shares have begun to recover from their mauling in the Budget, rising 9% in the past month, although they are still down 7% year to date.

The Budget pension reforms are likely to shrink the market in annuities, a profitable area for insurers for many years. However, Devlin said the impact had been ‘greatly exaggerated’ as the changes also ‘boost the attractiveness of corporate pensions, where Friends Life is the second largest player’.

‘Friends Life offers the fifth highest dividend yield in the FTSE 100 of 6.5%, which we believe can grow from 2015, and we view the recent weakness as a buying opportunity and we reiterate our “overweight” rating,’ said Devlin.

He also trimmed his price target for the shares to 360p from 364p. The shares added 2.6p to close at 331p.

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Key stats
Market capitalisation£1,338m
No. of shares out120m
No. of shares floating113m
No. of common shareholdersnot stated
No. of employees14723
Trading volume (10 day avg.)0m
Turnover£1,186m
Profit before tax£81m
Earnings per share63.78p
Cashflow per share91.34p
Cash per share25.20p

*Correct as at 11 Jun 2014

WH Smith on track for double-digit growth, says Investec

Kate Calvert of Investec Securities did not expect much from WH Smith’s (SMWH) third quarter trading statement so news of a better-than-expected 4% fall in high street sales impressed her.

Calvert reiterated her ‘buy’ rating on the newsagent chain and £14 price target as overall sales in the 14 weeks to 7 June came in flat, with like-for-like sales down 2% on a year ago, once the contribution from WH Smith’s travel stores in airports and stations was included.

‘With Christmas already in the bag for the high street, Q3 usually tends to be a holding statement ahead of the important travel season,’ said Calvert. ‘However, this is the first time for a very long time that high street has beaten expectations.

‘An improving Q3 sales trend sets travel up potentially for a better-than-forecast H2 and firmly underpins our top-end-of-the-range forecast. We nudge up our full-year 2014 profit before tax forecast by 1%. Valuation remains undemanding for a business capable of delivering double-digit growth and with a 3% yield.’

The shares gained 17p or 1.5% to close yesterday at £11.11.

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Key stats
Market capitalisation£316m
No. of shares out99m
No. of shares floating96m
No. of common shareholdersnot stated
No. of employeesnot stated
Trading volume (10 day avg.)0m
Turnover£15m
Profit before tax£23m
Earnings per share35.89p
Cashflow per share35.98p
Cash per share90.68p

*Correct as at 11 Jun 2014

NewRiver snaps up four retail parks

AIM-listed real estate investment trust (Reit) NewRiver Retail (NRR) has made its first acquisition since raising £85 million from shareholders in January.

NewRiver has used £17.3 million to buy four retail parks in Hull, Paisley near Glasgow, Wrexham in north Wales and Wymondham near Norwich, where it already operates. The parks have a 9.12% net initial yield, according to the company.

Peel Hunt analyst Kate Renn retained a ‘buy’ and a target price of 350p on the shares, which yesterday closed 4.75p or 1.5% higher at 319.75, compared to the 265p new shares issued in January.

‘We leave our forecasts unchanged as we already assume £160 million is invested before the March 2015 year end,’ said Renn.

Last November NewRiver bought 202 pubs from Marston’s in order to turn them into convenience stores. Renn said there could be a second deal to be done with the pub chain.

‘We await further news, particularly should a second deal with Marston’s pubs be announced.’

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Key stats
Market capitalisation£396m
No. of shares out258m
No. of shares floating247m
No. of common shareholdersnot stated
No. of employees5033
Trading volume (10 day avg.)0m
Turnover£664m
Profit before tax£-96m
Earnings per share-38.98p
Cashflow per share-27.41p
Cash per share6.02p

*Correct as at 11 Jun 2014

Liberum: Trinity Mirror slump is an opportunity

Trinity Mirror (TNI), publisher of the Daily Mirror, has seen its shares slump over the past three months creating what Liberum analyst Ian Whittaker thinks is a buying opportunity.

Whittaker reiterated his ‘buy’ rating and target price of 260p on the shares, which closed yesterday 2.25p or 1.5% higher at 154.25p

He said the falls in share price were outweighed by the positives within the company and the 6.9% dividend yield on the shares.

‘Trinity Mirror has fallen nearly a third in just over three months for very little reason,’ he said. ‘We would use this fall as an opportunity to “buy”’, pointing out the shares traded at just 4.8 times forecast earnings for next year. With ‘a strong management team driving change; and the market already discounting management’s aim to have digital advertising offsetting print declines, there are several reasons to take advantage of the recent weakness,’ said Whittaker.

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