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The Expert View: Barclays, Britvic and Capita
by Harry Brooks on Feb 15, 2013 at 05:01
A roundup of some of the best analyst commentary on shares, including African Barrick Gold and Renold.
Our daily round-up of analyst recommendations and commentary, featuring Barclays, Britvic, Capita, African Barrick Gold and Renold.
Investec downgrades Barclays
It's time to take a breather following the rapid rise in Barclays (BARC.L) shares, according to Investec analyst Ian Gordon, who has downgraded the bank from 'buy' to 'hold'.
The shares have gained 119% since their July 2012 lows, Gordon noted, and now seems like a good time to take stock. 'On 0.4x tangible net asset value, one did not need to believe that return on total equity would reach 13% by 2015 to own them, but we now see the risk/reward as more balanced,' he said.
'Barclays remains (by far) our preferred UK domestic bank, but we take a breather.' The analyst's target price rises from 320p to 340p based on reduced regulatory aggression of late, but the recent rise means there's still not enough upside left to justify a 'buy'.
Barclays is a member of Citywire Top Stocks through its top 10 position in the Standard Life Investments UK Equity Unconstrained fund run by Edward Legget. Shares in Barclays closed at 320p on Thursday, down 5.8p or 1.8%.
Canaccord trims target price for Britvic
Canaccord analyst Wayne Brown has trimmed his target price for Britvic (BVIC.L) after shares in the soft drinks maker plunged on Wednesday's news that the planned merger with AG Barr is to be referred to the Competition Commission.
Brown said the OFT's decision to refer the merger on the grounds that it raised competition concerns about the loss of competitive constraint from some of Britvic's brands on Barr's IRN BRU and Orangina brands was puzzling.
'With Britvic’s brands not directly competing with Irn-Bru in its niche category, this decision is perplexing,' he said. In terms of the impact on investors, the analyst said it was too early to tell, but the deal will be delayed by six-12 months at any rate.
Brown retains his 'hold' recommendation, but his target price falls 7% to 380p.
Shares in the group closed at 387.8p on Thursday, down 32.2p or 7.7%.
'Sell' Capita, Cantor Fitzgerald says
Cantor Fitzgerald analyst Caroline de La Soujeole has reiterated her 'sell' recommendation on Capita (CPI.L), warning it's going to come under increasing pressure as rivals of all sizes scour the outsourcing spectrum for potential deals.
The analyst's comments come amid news that Capita has made another acquisition, picking up infrastructure and managed services business Northgate Managed Services for £65 million. However, this doesn't alter de La Soujeole view that Capita is about to find itself squeezed.
'The analysis we conducted on changes in the outsourcing spectrum in our January 2013 Annual Support Services Review Keep calm and carry on outsourcing identified Capita as the company most likely to suffer from increased convergence in the outsourcing industry,' she said.
'There is increased evidence of blue collar facilities management companies moving up the outsourcing spectrum whilst IT service companies are moving down the food chain, squeezing Capita in the middle.'
Shares in the group closed at 820p on Thursday, down 11p or 1.3%.
Westhouse trims target price for African Barrick Gold
A poor start to the year for miner African Barrick Gold (ABG.L) has prompted Westhouse analyst Rob Broke to cut his target price to 255p from 305p.
'Despite updating the market in the Q4 production report that it would be rebasing production levels to those seen in 2012, ABG has effectively lowered last month’s guidance by 26,500-86,500 ounces to 540-600,000 ounces in 2013,' Broke said.
'As we noted last month, with no production growth in the short term, and with a wide array of issues to address, things are going to get worse before they get better. While doubt remains over the base production level, let alone future growth, there is little to recommend the stock.' Broke has a 'sell' recommendation on the shares.
Shares in the group closed at 308p on Thursday, up 6.5p or 2.1%.
Renold's sales slip
Finncap analyst David Buxton has warned that shares in engineering group Renold (RNO.L) are likely to suffer following a disappointing trading update.
The group’s third-quarter update highlighted weak demand in its chain division, with order deferral also affecting torque transmission. Overall revenues declined by 8.7% in the four months, with a year-to-date reduction of 6.9%.
'With a significant downgrade the shares trade on a price to earnings ratio of 19.4x that looks overvalued,' Buxton said. 'The shares had been running ahead of themselves on hopes of a management turnaround.' The analyst has a 'hold' recommendation on the shares.
Shares in the group closed at 25p on Thursday, down 3.3p or 11.5%.