The Expert View: Speedy Hire, SuperGroup and Moneysupermarket
A roundup of analysts' commentary on shares, also including Compass Group and Hangar 8.
Shore Capital downgrades Speedy Hire on accounting irregularities
Shore Capital has downgraded tool-hire firm Speedy Hire (SDY.L) from 'buy' to 'sell' following a warning of accounting irregularities.
The company's chief executive Steve Corcoran announced on Thursday that he would step down while the finance director and other senior managers of the international business were suspended following the discovery of the problem in the Middle East business, where it's believed control processes were 'repeatedly and deliberately circumvented', according to the announcement.
Shore Capital's David O’Brien warned that the news could have an immediate impact on trading: 'While management has stated that it is not in breach of its financial covenants, there has been ''a breach of certain other items'',' he said.
'We think this may well prove to have material implications for its customers, who may well reconsider their options in order to ensure that their projects, some of which will be under time penalties, are completed on time.'
Shares in the group closed at 50.5p on Friday, down 14p or 21.7%.
SuperGroup set for a bumper Christmas, Investec says
Fashion retailer SuperGroup (SPG.L) is on track for strong sales over the critical Christmas trading period, according to Investec, which has a 'buy' recommendation on the shares.
The company will report its first-half figures on 12 December, and analyst Kate Calvert is expecting a 20% rise in pre-tax profits.
'An update on its infrastructure investment plans, online and recent bolt-on acquisitions is expected, together with confirmation that its opening programme is on track,' she said.
'Overall, we expect a confident team ahead of the key Christmas quarter given how well the autumn/winter ranges seem to have been received.'
Calvert has a target price of £15.
Shares in the group closed at £12.03 on Friday, up 3p or 0.3%.
'Buy' Moneysupermarket Group, Canaccord says
Canaccord has reiterated its 'buy' recommendation on Moneysupermarket (MONY.L) despite news that the FCA is launching a review of insurance price comparison sites.
Insurance operations account for 59% of Moneysupermarket's revenues, analyst Simon Davies said. Any changes in regulations are potentially important for the company.
However, he believes it's not as bad as it might sound. '[The review] is focusing on transparency and conflicts of interest (and given that MONY is the only one of the big four price comparison sites that is not at least part owned by an insurance group, it scores well on the latter point).
'We expect some requirement to improve disclosures, potentially resulting in a modest increase in costs, but we do not expect a material impact on MONY.'
Shares in the group closed at 181.9p on Friday, up 1.6p or 0.9%.
UBS increases target price on Compass Group
UBS has increased its target price for contract caterer Compass Group (CPG.L) on the back of an encouraging annual update.
Revenues came in at £17.6 billion, beating analyst Jarrod Castle's estimate of £17.5 billion. Operating profits of £1.26 billion were also ahead of Castle's estimate.
Although the update was generally positive, the analyst did note the currency movements would weigh on results in the year ahead. 'Based on current exchange rates the headwind to 2013 operating profit is over £50 million while we estimate circa £0.7 billion in revenues. Although we are positive on 2014e we have slightly reduced our earnings per share estimates by 1.5% to take into account the currency headwind.'
Nonetheless, the analyst's target price rises from 900p to 920p, and he reiterated his 'buy' recommendation.
Shares in the group closed at 921p on Friday, down 1p or 0.1%.
'Buy' Hangar 8, Westhouse says
Westhouse has initiated aircraft logistics specialist Hangar 8 (HGR8.L) with a 'buy' recommendation, saying the valuation doesn't reflect the strong outlook for the company.
Hangar 8 operates privately owned jet aircraft, encompassing chartering, operational support and engineering support services.
'With signs of recovery in its end markets, we believe the combination of growth, high returns and balance sheet strength on offer are not reflected in 2014E price to earnings and enterprise value/earnings multiples of 10x and 4.6x, respectively. We initiate with a Buy rating and a 270p target price, ' analyst Kevin Fogarty said.
'We initiate with a Buy rating and a 270p target price.'
Shares in the group closed at 225.9p on Friday, up 5.9p or 2.7%.