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The Expert View: Tesco, RBS and Betfair

A roundup of some of the best analyst commentary on shares, including Amara Mining and Restaurant Group.

Our daily round-up of analyst recommendations and commentary, featuring Tesco, RBS, Betfair, Amara Mining and Restaurant Group.

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Key stats
Market capitalisation£28,031m
No. of shares out8,041m
No. of shares floating8,002m
No. of common shareholdersnot stated
No. of employees519671
Trading volume (10 day avg.) 14m
Turnover£64,539m
Profit before tax£2,948m
Earnings per share36.64p
Cashflow per share55.36p
Cash per share43.02p

*Correct as at 4 Jan 2013

Nomura: Tesco is winning the battle of the supermarkets

Nick Coulter, analyst at Nomura, has reiterated his 'buy' recommendation on Tesco (TSCO.L), expecting it to have won the battle for the nation's Christmas spending money.

Along with Sainsbury's and Morrisons, Tesco will report its trading results this week, and Coulter expects the red and blue to prevail. 'We expect Tesco to hold and marginally beat a soft comparison to post a six-week like-for-like (LFL) of +1%, outpacing both Sainsbury (estimated to have flat LFLs across Christmas and +0.8% for Q3) and Morrison (with a six-week LFL forecast of -2.5%),' he said.

More importantly, Coulter expects Tesco’s trading update to offer evidence of improving sales volumes.

Coulter said Tesco's 'reset' will make it tough for Sainsbury's to deliver higher sales in spite of its solid management, while for Morrisons he warned 'we err on the side of caution believing earnings- per-share risk to be to the downside'.

Shares in the group closed at 349.4p on Friday, down 0.6p or 0.2%.

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Key stats
Market capitalisation£37,653m
No. of shares out11,336m
No. of shares floating7,139m
No. of common shareholdersnot stated
No. of employees142800
Trading volume (10 day avg.) 8m
Turnover£21,410m
Profit before tax£-2,044m
Earnings per share- 18.89p
Cashflow per share- 1.30p
Cash per share719.13p

*Correct as at 4 Jan 2013

Investec stays bearish on RBS

Ian Gordon, analyst at Investec, has increased his target price for Royal Bank of Scotland Group (RBS.L) following a strong few months for the shares, but he retains a 'sell' stance, saying the outlook remains weak.

A fine of about £400 million for Libor manipulation is expected imminently, but Gordon said this is a 'drop in the ocean' compared with his estimate for fourth-quarter losses.

'In Q4 2012e, regulatory costs/redress, increased restructuring costs, flat non-core losses and an elevated tax charge underpin our forecast of an attributable loss of £1.4 billion,' he said. 'In 2013- 15e, we see a return to profit with a modest improvement in core profitability (despite an offset from EC-mandated business disposals).

'However, with a very weak outlook for ROE, we remain sellers. Our return on equity/cost of equity derived target price rises to 290p (from 265p).'

Shares in the group closed at 333.8p on Friday, up 1.4p or 0.4%.

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Key stats
Market capitalisation£699m
No. of shares out103m
No. of shares floating46m
No. of common shareholdersnot stated
No. of employees2264
Trading volume (10 day avg.) 0m
Turnover£388m
Profit before tax£47m
Earnings per share44.30p
Cashflow per share82.22p
Cash per share124.51p

*Correct as at 4 Jan 2013

Peel Hunt downgrades Betfair to 'hold'

Nick Batram, analyst at Peel Hunt, has downgraded Betfair (BET.L) from 'buy' to 'hold', saying it's going to take a while to realise the company's true potential.

Batram has updated his forecasts following December's accounting changes announced alongside the interims and to reflect the disposal of a majority stake in foreign exchange trading hub LMAX.

This adjustment results in his 2013 pre-tax profit forecast almost doubling to £35.8 million, but the earnings picture isn't so good. 'The biggest impact from the accounting changes is the move to reduce the amount of development expenditure that is capitalised and the effects of writing down about £46 million of previously capitalised costs,' he said.

'However, if we look at the business (ex Betfair US) then our earnings forecast is reduced by 5% and the equivalent earnings per share is just 3% higher.'

With no near-term catalysts to galvanise the shares, Batram has opted to downgrade.

Shares in the group closed at 670.5p on Friday, down 13p or 1.9%.

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Key stats
Market capitalisation£97m
No. of shares out168m
No. of shares floating143m
No. of common shareholdersnot stated
No. of employees643
Trading volume (10 day avg.) 0m
Turnover76m USD
Profit before tax8m USD
Earnings per share0.06 USD
Cashflow per share0.15 USD
Cash per share0.14 USD

*Correct as at 4 Jan 2013

Westhouse sees bright future for Amara Mining

Rob Broke, analyst at Westhouse, has reiterated his 'buy' recommendation on Amara Mining (AMA.L) (formerly Cluff Gold), expecting lots of positive newsflow in the months ahead.

'Amara has recently managed to breathe life into all three of its projects and I'm hopeful that the work the company is undertaking during 2013 will convince the market that the company will continue to make good progress towards its goal of becoming a mid-tier producer,' he said.

The first quarter of the year should see an initial resource estimate at its Côte d'Ivoire project Yaoure, plus mining and environmental licences for its Burkina Faso Sega mine.

The second quarter, meanwhile, should see the completion of a feasibility study at Baomahun (Sierra Leone) and the start of trucking of ore at Sega.

'Overall therefore we expect the first half of 2013 to be positive for Amara and are maintaining our buy recommendation and 124p target price,' he said.

Shares in the group closed at 58.5p on Friday, down 0.3p or 0.4%.

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Key stats
Market capitalisation£774m
No. of shares out200m
No. of shares floating194m
No. of common shareholdersnot stated
No. of employees10572
Trading volume (10 day avg.) 0m
Turnover£487m
Profit before tax£34m
Earnings per share17.18p
Cashflow per share31.44p
Cash per share5.12p

*Correct as at 4 Jan 2013

Canaccord backs Restaurant Group as UK consumers tighten their belts

Wayne Brown, analyst at Canaccord, has reiterated his 'buy' recommendation on The Restaurant Group (RTN.L) ahead of a trading statement on Wednesday.

The group is looking well placed to beat Brown's forecasts, with like-for-like sales up 3.5% after 43 weeks of trading.

Although Brown said the sector's set for a tough year as disposable incomes remain under pressure, this could play to RTN's strengths.

'The group has taken full advantage of the consumer shift away from the high street to leisure and retail parks,' he said. 'Being firmly placed in the value for money segment of the market, it has avoided the majority of deep discounting that has plagued the sector, thereby protecting brand equity.'

Shares in the group closed at 386.2p on Friday, down 1.9p or 0.5%.

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