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The Expert View: Barratt Developments, British American Tobacco and Kingfisher
by Harry Brooks on Sep 12, 2013 at 05:01
A roundup of some of the best analyst commentary on shares, also including Oxford Instruments and Thorntons.
Our daily round-up of analyst recommendations and commentary, featuring Barratt Developments, British American Tobacco, Kingfisher, Oxford Instruments and Thorntons.
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'Buy' Barratt Developments on share weakness, Jefferies says
Investors should seize the opportunity to buy shares in Barratt Developments (BDEV.L), according to Jefferies, which believes the company still has room to grow.
Yesterday's full-year results showed a 74% rise in annual profits to £192.3 million, and the 13,663 completions about 8% ahead of last year.
Addressing concerns that the shares may have topped out for now, analyst Anthony Codling said there's still upside potential. 'There is talk of travelling and arriving, however, our view is that we have not reached the destination, but rather a staging post.
'We would take advantage of this staging post and stock up on supplies of Barratt shares.'
Shares in the group closed at 317.1p on Wednesday, down 15.2p or 4.6%.
'Sell' British American Tobacco, Canaccord urges
British American Tobacco (BATS.L) plans to dominate the growing market for e-cigarettes look over-optimistic, according to Canaccord.
At its recent investor day BATS called e-cigs a 'key opportunity, given the clear fit with its existing core business.' At its Investor Day CEO Durante noted that the segment 'may well in time be large' and that e-cigs are 'clearly safer than tobacco'.
The big attraction in e-cigs is the potentially high margins, but analyst Eddy Hargreaves said these will come under pressure as competition ramps up.
'We do not dispute that BATS looks well-positioned in e-cigs relative to competitors and has first mover advantage, at least in Europe, but the outcome and growth rates are evidently extremely uncertain for numerous reasons,' the analyst said, reiterating his 'sell' recommendation on the shares.
'Hence, we believe a higher beta, relative to recent history, is now appropriate in valuing the shares. BAT’s strengths in Tobacco, its track record and management strength are well known and recognised, but recent strong performance in the core may now moderate slightly.'
Shares in the group closed at £33.29 on Wednesday, up 9p or 0.3%.
Cantor Fitzgerald upgrades Kingfisher
Cantor Fitzgerald has upgraded home improvement retailer Kingfisher (KGF.L) from 'sell' to 'hold' on the back of encouraging results and an improving economic backdrop.
Yesterday's interims showed pre-tax profits down 2% to £365 million, which was better than the £359 million that analyst Freddie George had pencilled in.
'The stock has benefited from a broader confidence in the outlook both in the UK and Europe and a stronger housing market in the UK,' he said.
'Although we believe that there may be some profit taking in the stock this morning, we are moving our recommendation from SELL to HOLD and raising our target price to 400p from 240p on the back of these results.'
Shares in the group closed at 408.5p on Wednesday, down 11.5p or 2.7%.
UBS drops target price for Oxford Instruments
UBS has reduced its target price for scientific instruments maker Oxford Instruments (OIG.L) following what the analysts called a 'far from the reassuring' AGM statement.
The statement noted challenging conditions in the US and Europe, with government spending on R&D under scrutiny. Budget cuts in the US have also caused orders to be delayed.
'Oxford Instrument’s AGM statement was far from the reassuring message it may have been, but we already knew FY14 would be a tough year for the company,' analyst Robbie Capp said, lowering his target price from £16 to £15.60.
However, he reiterated his 'buy' recommendation on the shares. 'Confidence certainly takes a hit, with no real signs of improvement six months into the year, and investors may well hold off until the interim outlook statement, but we still see this as a company you buy when valuation relaxes and hold for the long-run.'
Shares in the group closed at £13.69 on Wednesday, down 35p or 2.5%.
Thorntons beats expectations
Panmure Gordon has reiterated its 'buy' recommendation on chocolatier Thorntons (THT.L) on the back of consensus-beating results.
For the year to 29 June, Thorntons reported pre-tax profits of £5.6 million and earnings per share (EPS) of 6.0p, ahead of consensus forecasts of £5.2 million in profits and EPS of 5.5p.
Analyst Simon French has increased his 2014 EPS forecast by about 21% to 8p.
'On our upgraded forecasts the stock trades on a 2014 price to earnings (P/E) of 9.3x and an adjusted enterprise value/earnings of 6.9x,' he said. 'This feels undemanding for the 33% growth in earnings we forecast.
'We therefore reiterate our Buy recommendation and increase our target price from 100p to 116p, based on a 2014 P/E of 12.0x, and implying 29% potential upside.'
Shares in the group closed at 88p on Wednesday, down 2p or 2.2%.