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The Expert View: Aviva, Aggreko and ITV
by Harry Brooks on Mar 08, 2013 at 05:01
A roundup of some of the best analyst commentary on shares, also including Hunting and Cineworld.
Our daily round-up of analyst recommendations and commentary, featuring Aviva, Aggreko, ITV, Hunting and Cineworld.
Aviva slashes dividend as 'long, hard slog' begins
Insurance company Aviva (AV.L)'s decision to slash its dividend by 44% has prompted Shore Capital analyst Eamonn Flanagan to downgrade the shares from 'hold' to 'sell'.
The move, part of ongoing attempts to reshape the firm's balance sheet, saw the final 2012 dividend fall to just 9p per share, down from 16p last year. The cut follows similar action from RSA last month, and came alongside a loss of £3.1 billion for 2012.
Flanagan said the total loss of about £3 billion for 2012 was largely due to the impact of the sale of the US business for £1.1 billion, around half what it paid for it six years earlier.
'Even allowing for this the underlying performance of the business was grim – total life profits down 5%, non-life down about 4%, with operating profits down about 4% at £1,776 million, well below consensus of £2.1 billion,' he added.
'To us, it is this last feature which we believe will come under intense scrutiny, now that the dividend is ''out of the way''. We stress that the market should not underestimate the scale of the task facing the brand new management team..the long, hard slog begins now!'
Shares in the group closed at 313.5p on Thursday, down 46.4p or 12.9%.
Investec upgrades Aggreko to 'buy'
Investec analyst John Lawson has upgraded power systems specialist Aggreko (AGK.L) from 'hold' to 'buy' after it reassured investors on the outlook for the year ahead.
Aggreko reported revenues of £1.58 billion (up 13% year-on-year), a trading profit of £386 million (2011: £341 million), a pre-tax profit of £365 million (2011: £327.2 million), in line with guidance of £365 million, and a dividend per share of 23.91p (2011: 20.79p).
'On strategy, the group has reconfirmed its confidence in the business model and given clear financial guidance,' Lawson said. The company's statement said 'for the year as a whole remain unchanged from previous guidance'.
Lawson said this is good news for investors. 'Aggreko has said that for the next five years, the combined group should see on average (smoothing out the year-to-year variations) double-digit revenue and trading profit growth, with a return on capital employed of over 20%. The group also expects to increase cash returns.'
Shares in the group closed at £19.60 on Thursday, up 202.5p or 11.5%.
Westhouse downgrades ITV on share price surge
Westhouse analyst Roddy Davidson has downgraded ITV (ITV.L) from 'buy' to 'add' following a strong period for the shares.
Last week's full-year results showed adjusted pre-tax profits up 17% to £464 million, on external revenues up 3% to £2,196 million. The group also announced the repayment of £138 million of its £200 million 2019 bilateral loan, which Davidson said was a good move.
'We regard this as a sensible step in the on-going process of removing structural debt and creating a more efficient balance sheet,' he said. 'The latter has been transformed in recent years with a net debt position of £612 million at the end of 2009, transformed into net cash of £206 million in last month’s prelims.
'We have also nudged up our target price from 141p to 144p and remain extremely positive on ITV’s prospects, but have moderated our recommendation from buy to add following a 6% post results share price rise (which has taken its stock to within 16% of our target on a total return basis).'
Shares in the group closed at 128.5p on Thursday, up 1.3p or 1%.
Finncap puts Hunting under review
Oil industry supplier Hunting (HTG.L)'s expectation of a 'slow' first half because of weak demand in the US has spurred Finncap analyst David Buxton to put his 'buy' recommendation under review.
Yesterday's full-year results showed pre-tax profits of £123.6 million, up 55% year-on-year, partly because of acquisitions. The final dividend of 14p, (making 18.5p in total) was higher than Buxton's 17p forecast.
However, the company's comments on the trading outlook were decidedly muted: 'Our view for 2013 is a slow start with an improving second half. This conclusion is derived from discussions with major oil and gas companies, independents and original equipment manufacturer clients about their capital spend forecasts.'
Buxton said the statement was disappointing. 'We are likely to trim numbers, taking earnings per share from 66.1p to around 61p. This reduction in guidance is a little disappointing and maybe reflected in the shares today. Our historic Buy rating is now under review.'
Shares in the group closed at 908.6p on Thursday, down 22.9p or 2.5%.
Canaccord lifts target price for Cineworld
Canaccord analyst Wayne Brown has increased his target price for Cineworld (CINE.L) on the back of a strong set of results.
Prelimary results for the year to 27 December show revenues of £358.7 million, up 3.1% year-on-year. Pre-tax profits of £38.5 million were up 15.3%, and a full-year dividend of 11.8p, up 7.3%, has been proposed.
Brown said 2013 signals a step change in growth, with revenues forecast to increase by 14% compared with 3% in 2012.
'The group will start to open new cinemas at an increasing rate which should translate to a boost in profits from 2014 onwards,' he said. 'The investment behind a new CRM and IT system should have already started to accelerate the number of Unlimited card holders and its customer database.'
Brown's target price rises 3% to 360p, and he reiterated his 'buy' recommendation.
Shares in the group closed at 283.2p on Thursday, up 1.5p or 0.5%.