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The Expert View: Bellway, Cairn Energy and Britvic
by Harry Brooks on Oct 18, 2013 at 05:01
A roundup of analysts' commentary on shares, also including TUI Travel and Renishaw.
Our daily round-up of analyst recommendations and commentary, featuring Bellway, Cairn Energy, Britvic, TUI Travel and Renishaw.
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Liberum upgrades Bellway to 'buy'
Liberum Capital has upgraded Bellway (BWY.L) from 'hold' to 'buy' after the homebuilder released bullish expectations for sales volumes next year.
In its annual update Bellway announced it's now aiming to grow sales volumes by 15% in 2014, up from 8% in 2013 and 6% in 2012.
Analyst Charlie Campbell said the target should prove realistic: 'We believe that Bellway’s volume target is achievable due to its strong order book, site increases and good reservation rates (boosted by Help to Buy: Equity Loan). It may even prove to be conservative,' he said.
Campbell's target price goes from £14.32 to £17.00. 'We believe that housebuilders’ shares are best valued using price to book, calculated with reference to return on equity. The increase in our 2015E RoE forecast from 10.6% to 12.2% drives a rise in target price to book from 1.3x to 1.5x,' he added.
Shares in the group closed at £14.95 on Thursday, up 21.3p or 1.5%.
'Buy' Cairn Energy, Jefferies says
Jefferies has reiterated its 'buy' recommendation on oil explorer Cairn Energy (CNE.L) ahead of an imminent exploration push.
The exploration drive in Morocco will take a year to complete, targeting more than 4 billion barrels of oil equivalent. Analyst Justin Jordan said the programme would offer 'material upside' to the shares, and he also praised the group's recent fiscal discipline.
'Following the sale of its 6% interest in the heavy oil Mariner development and avoidance of $250 million-$300 million of future capex, Cairn has announced a share buyback programme of up to $300 million to be reviewed quarterly,' he noted.
'Our (unchanged) 385p target price is based on a small discount to our total risked sum-of-parts valuation of 416p. The shares current 34% discount to our overall Cairn valuation offers an appealing entry point, just ahead of an active 12-month multi-well high impact exploration program.'
Shares in the group closed at 285.2p on Thursday, up 9.2p or 3.3%.
Canaccord upgrades Britvic on strong quarter
Canaccord has upgraded soft drinks maker Britvic (BVIC.L) from 'sell' to 'hold' following an encouraging fourth-quarter update.
The results showed revenues up 4.4% over the quarter and pricing up 5.4%, which analyst Wayne Brown said was attributable to the good weather over the summer and very weak comparatives last year.
Brown acknowledged that his 'sell' call hasn't proved correct recently, with the shares maintaining their pre-merger talks rating. His target price rises to 550p from 420p, but he believes the shares are now fully valued.
'The shares should react positively today but these are up with events on fundamental valuation and we await for the cash conversion to improve. This is required for us to move to a positive recommendation,' he added.
Shares in the group closed at 604.9p on Thursday, up 4.9p or 0.8%.
UBS downgrades TUI Travel, prefers Thomas Cook
UBS has downgraded TUI Travel (TUI.L) from 'buy' to 'neutral' following a very strong run for the shares.
'We believe that despite the very strong operational performance ofthe company, expectations are now up with events, and headwinds from Egypt and France and the material short-haul capacity additions from the EU airlines could lead to some profit-taking in the short-term,' the analysts cautioned.
They maintain a 'buy' recommendation on rival holiday operator Thomas Cook, which they like as a result of its continued cost-cutting potential.
Shares in the group closed at 370.2p on Thursday, down 6.6p or 1.8%.
Investec puts Renishaw under review
Investec has put its recommendation for precision instruments maker Renishaw (RSW.L) under review following a disappointing first-quarter update.
Analyst Michael Blogg said the update implied a downgrade to his 2014 projections of around 25%, but he warned the margin of error is significant given the lack of visibility.
'This is the hardest stock we cover to forecast and the 1Q update underlines this,' he said. 'The 1Q is worse than we had expected even factoring in the lumpy orders of a year ago. As such, we place our forecasts under review.
'The stock has fallen in response to the statement, but we believe most holders understand the risks and own the shares for the long term. Renishaw remains a high quality name, but extremely volatile in terms of trading. We will update forecasts and valuation once we return from the AGM/Open Day.'
Shares in the group closed at £15.80 on Thursday, down 96p or 5.7%.