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The Expert View: Tullow Oil, EasyJet and IPF

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

Our daily round-up of analyst recommendations and commentary, featuring Tullow Oil, EasyJet, IPF, Moneysupermarket.com and Restaurant Group.

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Key stats
Market capitalisation£10,575m
No. of shares out907m
No. of shares floating844m
No. of common shareholdersnot stated
No. of employees1548
Trading volume (10 day avg.)2m
Turnover1,425m USD
Profit before tax401m USD
Earnings per share0.45 USD
Cashflow per share0.84 USD
Cash per share0.21 USD

*Correct as at 11 Jan 2013

Canaccord says 'sell' Tullow Oil

Thomas Martin, analyst at Canaccord, has reiterated his 'sell' recommendation on Tullow Oil (TLW.L) following a disappointing trading update.

Average daily production over 2012 came in at 79,200 barrels of oil equivalent, 3% below consensus expectations. This shortfall was due to a shutdown in the UK North Sea in December following a safety incident, the update said.

The update featured no new drilling results, and revealed that $670 million would be written off for the year.

'Overall we don't see anything to make us more positive on Tullow, we still believe the premium attributed to exploration is too large,' he said. 'We think the guidance on test rates in Kenya might raise some concerns over a region for which expectations are high.'

Shares in the group closed at £11.86 on Friday, down 39p or 3.2%.

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Key stats
Market capitalisation£3,327m
No. of shares out396m
No. of shares floating223m
No. of common shareholdersnot stated
No. of employees8446
Trading volume (10 day avg.)1m
Turnover£3,854m
Profit before tax£255m
Earnings per share67.36p
Cashflow per share95.09p
Cash per share222.98p

*Correct as at 11 Jan 2013

UBS downgrades EasyJet

Jarrod Castle, analyst at UBS, has downgraded no-frills airline EasyJet (EZJ.L) from 'buy' to 'neutral' following a hefty rise in the shares over the course of 2012.

Castle said last year's rise of more than 90% was attributable to a number of factors: 'individual and industry capacity discipline, strong yield performance, taking market share from flag carriers, special and ordinary dividend payments, momentum from business travel initiative, overall share market seeing upside with high beta stocks outperforming and market’s belief that reserved seating will be a success'.

And the analyst said more share price gains aren't out of the question, with his projections suggesting EasyJet should gain market share this year. The mild winter also offers grounds for optimism, he added.

However, despite raising his target price from 780p to 890p, Castle said there's not enough upside left to justify a 'buy' stance.

Shares in the group closed at 848p on Friday, up 14p or 1.7%.

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Key stats
Market capitalisation£989m
No. of shares out253m
No. of shares floating247m
No. of common shareholdersnot stated
No. of employees5899
Trading volume (10 day avg.)0m
Turnover£482m
Profit before tax£77m
Earnings per share29.57p
Cashflow per share35.29p
Cash per share6.96p

*Correct as at 11 Jan 2013

Berenberg downgrades International Personal Finance

Pras Jeyanandhan, analyst at Berenberg Bank, has downgraded home credit business International Personal Finance (IPF.L) from 'buy' to 'hold' following a resurgence in the shares over the past year.

The appointment of Gerard Ryan as chief exec in January last year marked a turning point for the shares, Jeyanandhan noted, with the 60% fall in the shares in the second half of 2011 giving way to a 150% rally after he joined.

'While sentiment towards IPF has rightly recovered as the company’s strategy has been refreshed, we think the shares may now have run a bit too far too fast,' Jeyanandhan said.

'While we like the growth story, at 12x 2013E and 2.4x 2013 tangible book value for a 22% return on tangible equity, we feel further near-term upside is limited.'

Shares in the group closed at 389p on Friday, down 4.2p or 1%.

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Key stats
Market capitalisation£901m
No. of shares out537m
No. of shares floating252m
No. of common shareholdersnot stated
No. of employees430
Trading volume (10 day avg.)0m
Turnover£181m
Profit before tax£17m
Earnings per share3.22p
Cashflow per share8.60p
Cash per share6.87p

*Correct as at 11 Jan 2013

Westhouse lifts target price for Moneysupermarket.com

Roddy Davidson, analyst at Westhouse, has reiterated his 'add' recommendation on price comparison site Moneysupermarket.com (MONY.L) following the publication of its pre-close trading statement.

Full-year revenues are expected to surge about 15% year-on-year to £204.5 million, and Davidson expects to upgrade his full-year pre-tax profit forecast by about 5% and his dividend estimate by about 4% from 5p to 5.2p.

Davidson said he is bullish on the group's medium-term prospects, citing the following factors:

  • Its ability to benefit from an austere economic backdrop, ongoing structural change in consumer buying habits and the prospect of rising insurance premiums;
  • Its clear lead in the fast growing UK price comparison market;
  • Its financial strength;
  • Our expectation of very attractive earnings and dividend growth (+56% and +27% respectively over two years pre-upgrades)

The analyst's target price rises from 168p to 180p.

Shares in the group closed at 168p on Friday, up 9.7p or 6.1%.

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Key stats
Market capitalisation£751m
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 11 Jan 2013

Nomura: Restaurant Group's a 'buy'

Rebecca Langley, analyst at Nomura, has increased her target price for Restaurant Group (RTN.L) on the back of strong Christmas trading figures, and she reiterated her 'buy' recommendation.

Like-for-like (LFL) sales rose 9% in November and December, meaning growth for the year of 4.5% - well ahead of Langley's 1.5% prediction from the start of the year. 2012 saw 28 new restaurant opened, creating over 700 new jobs.

'The stock has performed well, +31% in FY12 (21% relative), reflecting strong LFLs and improving sentiment towards UK consumers,' Langley said.

'Nonetheless, it remains our favoured play on the casual dining market, with structural growth and impressive return on invested capital. We are raising our target price to 425p as we roll forward to FY13 estimates with a target free cash flow yield of 8.5%.'

Shares in the group closed at 375p on Friday, up 2.3p or 0.6%.

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