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The Expert View: RBS, Stagecoach, Carillion

A round-up of some of the best analyst commentary on shares, also including Ashtead and PZ Cussons.

Our daily round-up of analyst recommendations and commentary, featuring RBS, Stagecoach, Carillion, Ashtead and PZ Cussons.

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Key stats
Market capitalisation£1,597m
No. of shares out429m
No. of shares floating228m
No. of common shareholdersnot stated
No. of employees6125
Trading volume (10 day avg.)0m
Turnover£883m
Profit before tax£63m
Earnings per share14.70p
Cashflow per share21.27p
Cash per share24.12p

*Correct as at 11 Dec 2013

PZ Cussons target price down but don’t get in a lather

PZ Cussons (PZC.L), the home of Cussons soap and other consumer brands, may have announced a 4% rise in half year profits but Numis still dropped its target price and retained a ‘hold’ on the shares.

Analyst Charles Pick reduced the target price to 388p from 402p as trading becomes tougher for the company thanks to a weakening in Asian currency markets which has meant more money has had to be ploughed into that arm of the business.

Europe, however, has seen ‘robust’ performance from the UK washing and bathing division, and its four beauty brands have performed well. The Cussons baby range has also produced record double-digit revenue growth in Indonesia.

‘Most markets are seeing a challenging trading environment, especially so Asia due to ongoing currency weakness,’ said Pick. ‘However, brand innovation/renovation are expected to continue to drive organic sales and profit growth’

Shares ended down 3.26%, or 12.4p, at 367p.

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Key stats
Market capitalisation£2,131m
No. of shares out575m
No. of shares floating415m
No. of common shareholdersnot stated
No. of employees35506
Trading volume (10 day avg.)0m
Turnover£2,805m
Profit before tax£159m
Earnings per share27.22p
Cashflow per share48.66p
Cash per share45.51p

*Correct as at 11 Dec 2013

Stagecoach remains a ‘buy’ after driving business forward

Bus operator Stagecoach (SGC.L) remains a buy after solid interim results that were better than expected.

Profits in the UK bus business rose marginally to £76.9 million despite last year’s profits benefiting from a £4 million Olympics contract. Revenues were up in all areas; commercial, concessionary, school runs, contracts and hires and excursions.

Panmure analyst Gert Zonnerveld said the company is trading in line with expectations and ‘prospects remain attractive’ due to the gains that can be made in rail.

‘Public transport fundamentals are positive and we see sustained long term growth in UK bus and rail,’ he said. ‘The company is in our view well placed to win additional rail franchises going forward. Near term targets including Docklands Light Railway, Thameslink and East Coast, with a lot more opportunities to follow over the medium term.’

Zonnerveld placed a target price of 380p on the shares.

Shares closed up 2.8%, or 10p, at 372p.

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Key stats
Market capitalisation£53,742m
No. of shares out16,387m
No. of shares floating7,243m
No. of common shareholdersnot stated
No. of employees120300
Trading volume (10 day avg.)10m
Turnover£18,530m
Profit before tax£-5,820m
Earnings per share-52.52p
Cashflow per share-35.77p
Cash per share709.78p

*Correct as at 11 Dec 2013

RBS departure is bad timing but recovery still looks good

Taxpayer-funded RBS (RBS.L) is providing drama for investors with group finance director Nathan Bostock having announced he will leave for a more prestigious role at Santander after just two months in the job.

Shore Capital analyst Gary Greenwood said the news that Bostock will depart, to become deputy chief executive at Santander, is ‘both surprising and disappointing’ but said the share was still a ‘buy’ with a target price of 337p.

A replacement finance director is yet to be announced and Bostock will stay on at RBS to hand over to his successor.

‘The timing [is] somewhat unhelpful given that the company is currently in the process of undergoing another strategic review,’ said Greenwood. ‘Therefore, we expect the shares to react negatively this morning. That said we remain positive on the medium-to-long term recovery prospects for the company and its shares and hence would view any associated share price weakness as a buying opportunity.’

News of Bostock's departure meant shares closed down 2.91%, or 9.8p, at 326p.

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Key stats
Market capitalisation£3,732m
No. of shares out503m
No. of shares floating483m
No. of common shareholdersnot stated
No. of employees9500
Trading volume (10 day avg.)1m
Turnover£1,362m
Profit before tax£139m
Earnings per share27.34p
Cashflow per share73.60p
Cash per share4.03p

*Correct as at 11 Dec 2013

Further growth expected at Ashtead

Liberum Capital is still backing rental equipment provider Ashtead (AHT.L) as a ‘buy’ as it moves into the early stages of a cyclical recovery.

Analysts led by David Brockton increased their target price for Ashtead shares to 810p, up from 765p, thanks to its ‘significant competitive advantage as a result of its purchasing power and young fleet, relative to industry’.

Brockton said he expected to see earnings per share increase by a further 6% and 7% over 2014 and 2015 respectively. He now forecasts a compound annual growth rate of 21% on the shares.

‘The pace of upgrades may slow, but the rating is inexpensive, earnings growth should remain strong and return on invested capital keeps improving,’ said Brockton. ‘We reiterate our Buy rating.’

Despite the positive analyst sentiment Ashtead ended the day down 1.3%, or 10p, at 730p.

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Key stats
Market capitalisation£1,298m
No. of shares out430m
No. of shares floating413m
No. of common shareholdersnot stated
No. of employees41433
Trading volume (10 day avg.)1m
Turnover£3,666m
Profit before tax£149m
Earnings per share34.60p
Cashflow per share50.48p
Cash per share153.29p

*Correct as at 11 Dec 2013

Carillion still a ‘hold’ as it puts plans on backburner

Concerns about medium term targets means support services provider Carillion (CLLN.L) remains a hold for Cantor.

Shares closed up 1.11%, or 3.3p, at 301p

Analyst Caroline de La Soujeole placed a target price of 315p on the company after ‘a mixed statement’ that showed trading in the fourth quarter remained ‘broadly in-line with expectations’ and the announcement that it has extended its contract with BT for another 3.5 years.

Despite this positive near-term news, the ‘outlook statement strikes a cautious tone with market conditions expected to remain challenging’.

‘It also seems to us that management have dropped their medium term targets which were to deliver growth in support services and double annual revenues in the Middle East and Canada in the five years to 2015 to c.£1 billion in each case (these targets were not mentioned in today’s statement for the first time since they were set in 2010),’ said de La Soujeole.

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