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The Expert View: AO World, SSE and Computacenter
by Michelle McGagh on Jul 18, 2014 at 05:01
Our daily roundup of the best analyst commentary on shares, also including Next Fifteen and Xaar.
Numis banks on international success for AO World
Online white goods retailer AO World (AO) continues to stick to its growth plan, reporting sales growth of more than 30% in the first quarter, as Numis predicts international success.
Andrew Wade, analyst at Numis, said this was in line with the fourth quarter and consistent with his full-year sales growth forecasts of 27%, leading him to reiterate his ‘buy’ recommendation and target price of 350p on the shares, which fell 3.2% to 236.1p yesterday.
‘Good progress continues to be made with strategic initiatives, including TVs ad Germany,’ he said. ‘We leave our forecasts unchanged and retain our “buy” recommendation, continuing to believe that AO’s superior customer proposition underpins a huge growth opportunity, both in the UK and Europe.
‘Given the long-term nature of AO’s opportunity and our confidence in the replicability of its model in overseas territories, we base our 350p target price on a scenario which incorporates moderate international success.’
SSE hit by customer loss and difficult energy markets
Energy supplier SSE (SSE) has been hit by customer losses and other headwinds in the energy markets but the company is still on track on its full-year dividend policy.
Liberum analyst Peter Atherton retained a ‘hold’ recommendation and target price of £15.20 as the company reported a ‘continued challenging market environment in the first quarter’. Shares fell 1.1% to £15.25 yesterday.
‘SSE lost another 110,000 retail customers, demand and prices for energy remain weak – especially gas,’ said Atherton. ‘But the company reiterates full year guidance for 2014/15 earnings per share to be “around or slightly greater than 2013/14”. Dividend policy of at least retail price index growth also reiterated. SSE currently yields 5.8% which has provided good share price support despite difficult market conditions.’
Computacenter improvements could lead to ‘modest’ upgrades
Investec is predicting ‘modest’ upgrade potential for Computacenter (CCC), which it said was progressing well across all lines of business.
Analyst Julian Yates retained a ‘buy’ rating and target price of 760p on the shares, which are trading at 620p, following strong results for the first half of its financial year and improvements in other parts of Europe.
‘The pre-close confirms business is making good progress on most fronts; we retain our full-year 2014 estimates. UK continues to be the driving force of growth, with the first half of the year seeing another excellent service result and supply chain posting decent growth,’ he said.
He added that new service contract wins in Germany were ‘very encouraging as this is the key data-point to drive full-year 2015 sales growth’ and in France the top line had improved although profitability remained a challenge.
‘Overall business traction is encouraging and we see modest upgrade potential,’ said Yates.
Next Fifteen upgraded by Peel Hunt
Digital marketing and public relations company Next Fifteen Communications (NFC) has been upgraded following healthy trading in the first half of the year.
Peel Hunt analyst Malcolm Morgan upgraded his recommendation from ‘hold’ to ‘buy’ and increased the target price from 110p to 140p as he expects the company to confirm good results, particularly from business in the US. Shares were trading down 2% at 112p at yesterday's close.
‘We expect the engine of growth – the US – to have continued to do well. The current rating still reflects the legacy of issues of financial control that prompted the appointment of Peter Harris as chief executive in January,’ he said. ‘We believe that these issues progressively will be superseded by a more positive assessment of the margin and profit opportunity open to the company as it addresses its geographic reach and cost structure.’
Xaar remains an ‘attractive asset’, says Jefferies
Ink-jet printer maker Xaar (XAR) has released a short trading statement saying first half sales will be £60 million, in line with expectations and proving the company remains attractive, according to Jefferies.
Analyst Andy Douglas retained a ‘buy’ recommendation and target price of 800p on the shares, stating the announcement would ‘give some reassurance to the market in the near-term and we continue to believe that Xaar remains a strategically attractive asset’. Shares were trading at 549.5p yesterday.
‘With the group not reporting its interims until late August this update helps to bridge what is a long close period, and gives an initial indication of first-half 2014 sales/the net cash position at the half-year,’ he said.
‘It is only a month since the group’s last update, but we welcome comments that trading remains in line with the board’s expectations. We suspect that those investors with concerns over the outlook for the second half of 2014 and/or 2015 will continue to look for more comfort on the outlook and that none of the previously-described issues have reappeared or worsened. However we believe this is a step in the right direction.’