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The Expert View: William Hill, Aviva and Ashtead

Our daily roundup of the best analyst commentary on shares, also including Songbird Estates and Synergy Health.

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Key stats
Market capitalisation£2,803m
No. of shares out871m
No. of shares floating869m
No. of common shareholdersnot stated
No. of employees17089
Trading volume (10 day avg.)4m
Profit before tax£211m
Earnings per share24.74p
Cashflow per share34.29p
Cash per share23.86p

*Correct as at 17 Apr 2014

William Hill downgraded as gov’t chases gambling tax revenue

Betting stalwart William Hill (WMH.L) is suffering a ‘death by a thousand cuts’ according to Jefferies, which has downgraded the stock.

Analyst Ian Rennardson has downgraded his recommendation from ‘buy’ to ‘hold’ and slashed the target price from 500p to 350p – shares closed yesterday up 1.5p, or 0.5%, at 322p.

Rennardson is concerned about government regulation of the betting market rather than the financials of the company.

‘While we believe that underlying trading is largely back on track, and online growth will remain robust… trying to second-guess government intentions regarding taxation and regulation is not the basis for a rational investment decision,’ he said.

He added the UK government has ‘made a habit of hitting the gambling industry with surprise tax rises’ such as with its clampdown in the March Budget and warned that further ‘negative legislation on gaming machines’ should not be ruled out.

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Key stats
Market capitalisation£1,888m
No. of shares out740m
No. of shares floating546m
No. of common shareholdersnot stated
No. of employees942
Trading volume (10 day avg.)0m
Profit before tax£617m
Earnings per share84.96p
Cashflow per share124.13p
Cash per share79.47p

*Correct as at 17 Apr 2014

Songbird’s London focus makes it a ‘buy’ for Peel Hunt

Canary Wharf owner Songbird Estates (SBD.L) offers a ‘cyclical play’ on London property in the view of Peel Hunt.

Analyst Kate Renn retained a ‘buy’ recommendation and increased the target price from 200p to 280p. Shares closed yesterday down 2p, or 0.8%, at 235p.

She was impressed by surprise results with 38% net-asset-value (NAV) growth in 2013 and a development pipeline that will boost NAV by a further 20% over coming years, as the company refocuses on London’s residential property market.

Renn said Songbird developments would also be boosted by the opening of the new Crossrail links opening in four years.

‘Songbird has previously provided investors with a long-term warrant on large scale financial tenants through its 69% holding in Canary Wharf,’ she said. ‘The stock now offers a cyclical play on high-grade London and residential developments – and that is good news, due to the cyclical upturn in London.’

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Key stats
Market capitalisation£4,563m
No. of shares out503m
No. of shares floating486m
No. of common shareholdersnot stated
No. of employees9806
Trading volume (10 day avg.)2m
Profit before tax£139m
Earnings per share27.34p
Cashflow per share73.60p
Cash per share4.03p

*Correct as at 17 Apr 2014

Cantor reiterates Ashtead ‘buy’ on share weakness

Cantor has reiterated its ‘buy’ recommendation for equipment rental business Ashtead (AHT.L) after recent share price weakness.

Analyst Caroline de La Soujeole reiterated her ‘buy’ rating and target price of £10.60. Shares closed yesterday up 19.5p, or 2.2%, at 907p.

‘Similarly to other “momentum” stocks, Ashtead’s shares have been under pressure in the past month, underperforming the FTSE All Share by 6%,’ she said.

‘In our view, this recent weakness provides an attractive entry point for investors. We are buyers of the shares as we believe that the company is well placed to see further growth over the medium-term driven by structural changes, end market recovery and market share gains in its core US market.’

De La Soujeole anticipates that over the next three years company earnings, based on compound annual growth rate, will sit at 25%.

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Key stats
Market capitalisation£724m
No. of shares out59m
No. of shares floating56m
No. of common shareholdersnot stated
No. of employees5256
Trading volume (10 day avg.)0m
Profit before tax£31m
Earnings per share51.97p
Cashflow per share138.58p
Cash per share43.04p

*Correct as at 17 Apr 2014

Synergy suffers weak quarter, but US opportunities await

Investec has reiterated its ‘buy’ recommendation for Synergy Health (SYR.L) on the outsourced healthcare services provider’s ability to tap the US market.

Analyst Nicholas Keher reiterated his ‘buy’ rating and target price of £14.50 on the shares, which were trading down 8p, or 0.6%, at £12.41 yesterday, despite a weak trading update for the fourth quarter.

Keher downgraded earnings per share 3% but was positive about the opportunities for the company.

‘Synergy has reported an in line preliminary pre-close trading update in spite of a weak fourth quarter, which was impacted by the poor weather in Europe and the US,’ he said. ‘However, although Synergy continues to drive underlying revenue momentum from recent contract wins, we are putting through small earnings per share downgrades [of 3%] due to currency.

‘We think the investment case remains focused on Synergy’s ability to tap the US opportunity, on which we hope to hear more as the year progresses.’

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Key stats
Market capitalisation£14,993m
No. of shares out2,947m
No. of shares floating2,921m
No. of common shareholdersnot stated
No. of employees27718
Trading volume (10 day avg.)8m
Profit before tax£648m
Earnings per share21.75p
Cashflow per share33.64p
Cash per share848.30p

*Correct as at 17 Apr 2014

Aviva ‘fully valued’ after restructure

Insurer Aviva (AV.L) is succeeding in its restructure but future benefits have already been priced in and the shares are ‘fully valued’ according to Berenberg Bank.

Analyst Matthew Preston retained a ‘sell’ recommendation and target price of 450p on the shares, which closed yesterday up 10p, or 2%, at 509p.

Preston said against its peers Aviva was not good value for investors.

‘[There is] much to applaud but [the shares are] fully valued. While Aviva continues to make progress in restructuring its overly diverse business model, and despite screening as cheap versus the more pure-play UK life names, it looks fully valued against less leveraged European peers,’ he said.

‘In our view, management has already been given credit for a full restructuring, resulting in a risk of disappointment. This looks to be most acute in terms of dividend expectations, with the upper end of consensus suggesting a dividend compound annual growth rate of 20%. Our forecasts are for a more conservative 7%.’

He added that while Aviva would remain ‘one of the key scale players in the UK life market’ there were challenges and that he preferred AXA and Allianz.

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