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The Expert View: RSA, Vodafone and BP

A roundup of some of the best analyst commentary on shares, also including Bunzl and Anglo American.

Our daily round-up of analyst recommendations and commentary, featuring BP, Vodafone, RSA Insurance, Bunzl and Anglo American.

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Key stats
Market capitalisation£4,128m
No. of shares out3,553m
No. of shares floating3,549m
No. of common shareholdersnot stated
No. of employees23240
Trading volume (10 day avg.)9m
Turnover£8,735m
Profit before tax£417m
Earnings per share11.78p
Cashflow per share17.62p
Cash per share35.63p

*Correct as at 20 Feb 2013

Sell RSA after dividend setback, Panmure says

RSA Insurance (RSA.L) has lost a 'key' prop to its share price, said disapointed Panmure Gordon analyst Barrie Cornes after the company announced its 2012 final dividend would be 33% lower than that of the prior year, while it expects a similar drop in the 2013 interim dividend.

Panmure cut its recommendation on the shares to 'sell' from 'hold' in response to the news. Investors seemed to agree, pushing the shares down 14% yesterday morning.

Cornes commented: 'We view the valuation as fully stretched but the dividend acted as the key support for the share price yielding 7.1%. With the cut in 2013 to 6.1p per share the yield falls to a much more modest 4.5% which in our view will focus attention back on to the valuation.'

He also cut his target price to 120p from 130p.

Shares in the group closed at 117p on Wednesday, down 19.3p or 14.16%.

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Key stats
Market capitalisation£79,753m
No. of shares out48,950m
No. of shares floating48,827m
No. of common shareholdersnot stated
No. of employees86373
Trading volume (10 day avg.) 119m
Turnover£46,417m
Profit before tax£5,481m
Earnings per share10.76p
Cashflow per share29.17p
Cash per share17.04p

*Correct as at 20 Feb 2013

Vodafone snaps up 4G spectrum on the cheap

Liberum Capital analyst Lawrence Sugarman has reiterated his 'buy' recommendation on Vodafone (VOD.L), saying the telecoms giant has emerged as the winner from the UK's 4G spectrum auction.

The auction raised £2.34 billion, a fair bit short of the government's £3.5 billion target. Vodafone paid £790 million in all, significantly less than the £1 billion Sugarman had estimated before the auction.

'Vodafone has secured more spectrum in the auction than its competition, which should put them in a strong position going forward,' the analyst said. 'In the 800MHZx band it has secured 2x10 MHz (the same as Telefonica and twice as much as EE and Hutch) it has also secured 2x20 MHz in the 2.6GHz band plus an additional 25 MHz of unpaired spectrum in the 2.6 GHz band.'

He added that BT has also done well, paying £186 million for its slice of the rainbow, which he said 'gives BT plenty of options to provide incremental services to complement its existing Wifi and broadband strategy'.

Shares in Vodafone closed at 162.6p on Wednesday, down 0.85p or 0.5%.

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Key stats
Market capitalisation£86,116m
No. of shares out19,158m
No. of shares floating19,088m
No. of common shareholdersnot stated
No. of employees83400
Trading volume (10 day avg.) 31m
Turnover248,715m USD
Profit before tax7,509m USD
Earnings per share0.39 USD
Cashflow per share0.82 USD
Cash per share0.68 USD

*Correct as at 20 Feb 2013

BP a buy despite 'complex' outlook

BP (BP.L) remains a 'buy' say analysts at UBS, despite a 'complex' investment case in light of the ongoing Deepwater Horizon legal process.

On the one hand, after getting an update from BP, the UBS team sayS the process 'could stretch out for many years'. On the other, a settlement is still possible.

'We believe that BP would like to settle the bulk of its civil litigation concerning Macondo and thereby de-risk the company. But the board needs to balance this derisking with the optimal economic outcome which in the past has been lengthy litigation,' UBS says.

The civil trial in the Deepwater Horizon case is due to start in New Orleans on 25 February (criminal claims with the US government were resolved in November 2012).

'While we see some share price upside we continue to see the investment case as quite complex until many of these issues are dealt with and the outlook is less complicated,' UBS adds.

UBS has a 500p target price for BP.

Shares in the group closed at 448.7p on Wednesday, up 2.4p or 0.5%.

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Key stats
Market capitalisation£27,302m
No. of shares out1,391m
No. of shares floating1,271m
No. of common shareholdersnot stated
No. of employees100000
Trading volume (10 day avg.) 3m
Turnover18,649m USD
Profit before tax- 968m USD
Earnings per share-0.77 USD
Cashflow per share0.87 USD
Cash per share4.29 USD

*Correct as at 20 Feb 2013

JP Morgan cuts target price for Anglo American

JP Morgan analyst James McGeoch has trimmed his target price for mining company Anglo American (AAL.L) after it published underwhelming guidance figures for the year ahead.

The group's 2012 operating profits came in at $6.16 billion, 2% ahead of McGeoch's forecast, and underlying earnings of $2.84 billion were 15% ahead, driven by lower than anticipated tax, interest and minorities.

However, McGeoch wasn't impressed by the forward-looking guidance. Capital expenditure guidance for the year ahead was $1.75 billion-2.75 billion above his forecasts, which he said implies the company will be moving into negative free cash flow territory, 'just as most of the peer group are moving in the opposite direction'.

'While we recognise the medium-term, self-help story around the new CEO providing positive momentum, we remain concerned around the structural issues the company faces. Coupled with an uninspiring valuation, we therefore retain our underweight recommendation,' he added. His target price falls from £16.80 to £16.40.

Shares in the group closed at £19.51 on Wednesday, down 44.3p or 2.2%.

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Key stats
Market capitalisation£4,096m
No. of shares out332m
No. of shares floating324m
No. of common shareholdersnot stated
No. of employees11956
Trading volume (10 day avg.)0m
Turnover£5,110m
Profit before tax£124m
Earnings per share37.99p
Cashflow per share60.05p
Cash per share22.44p

*Correct as at 20 Feb 2013

Expect strong results from Bunzl, Shore Capital says

Outsourcing business Bunzl (BNZL.L) looks set to post a strong set of full-year results on Monday, according to Shore Capital analyst Robin Speakman, who has a 'buy' recommendation on the shares.

'Organic development continues to run either side of c4%, trending to GDP plus. However, reinvesting free cash flows in bolt-on acquisitions, building economies across the geographic regions Bunzl serves, is leveraging this growth,' he said.

'Bunzl’s proven business model provides its clients with working capital efficiency, we see strong demand for this for the foreseeable future with capital constraints remaining across the globe, maintaining steady demand.'

The analyst expects revenues for the year of about £5.36 billion, and an adjusted pre-tax profit figure of £320 million. He expects the dividend to rise 9% to 28.7p.

Shares in the group closed at £12.34 on Wednesday, up 13.4p or 1.1%.

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