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The Expert View: BG Group, Vodafone and Domino’s

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by Michelle McGagh on Jan 28, 2014 at 05:01

A roundup of analyst recommendations and comments, also including Close Brothers Group and Speedy Hire.

Our daily round-up of analyst recommendations and commentary, featuring BG Group, Vodafone, Close Brothers Group, Speedy Hire and Domino’s.

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Key stats
Market capitalisation£36,819m
No. of shares out3,409m
No. of shares floating3,382m
No. of common shareholdersnot stated
No. of employees5713
Trading volume (10 day avg.)6m
Turnover11,488m USD
Profit before tax1,951m USD
Earnings per share0.57 USD
Cashflow per share1.04 USD
Cash per share0.79 USD

*Correct as at 27 Jan 2014

BG hit by deteriorating climate in Egypt

A disappointing production update from energy company BG Group (BG.L) has meant a sharp markdown in the shares, despite the company appearing to be on a steadier course.

Ahead of its full year 2013 results, the group has announced that it expects to incur a post-tax impairment of $2.4 billion associated with the ‘difficult operating environment in Egypt and lower forward gas prices in the US, coupled with lower production profiles in both countries’.

Jonathan Jackson, analyst at Killik & Co, retained a ‘buy’ recommendation and set a target price of £10.70 despite the problems.

Jackson is also concerned that 2014 oil production volumes will be 10% lower than current market expectations, again driven down by the markets in Egypt and the US.

‘There was no comment on the group’s financial position in today’s statement, although we believe the balance sheet remains robust,’ said Jackson. ‘For us, the BG story has never been about near-term earnings progression, but the long-term growth potential.’

Shares had plummeted 15.3%, or 192p, to £10.63 by Monday lunchtime.

Key stats
Market capitalisation£108,794m
No. of shares out48,466m
No. of shares floating48,371m
No. of common shareholdersnot stated
No. of employees91272
Trading volume (10 day avg.)71m
Profit before tax£429m
Earnings per share0.87p
Cashflow per share16.94p
Cash per share26.52p

*Correct as at 27 Jan 2014

Vodafone bid stalls, but it’s not over yet

News that AT&T will not bid for Vodafone (VOD.L) upset investors but Nomura analysts have retained their ‘buy’ recommendation based on a potential future bid.

Analyst James Britton kept his target price of 250p on the shares despite AT&T saying there will be no bid forthcoming in the next six months at the request of the UK Takeover Panel.

This news was not welcomed on the stockmarket and added to pressures Vodafone is already facing.

‘Vodafone’s standalone valuation continued to be affected by tough operating trends, adverse FX headwinds and the uncertain costs required to develop fixed capabilities and become competitive with convergence products,’ said Britton.

However, AT&T could return. ‘Our view remains that AT&T remains interested in European mobile assets and is likely to target Vodafone later in the year,’ he said.

At the time of writing shares were down 5.8%, or 13.5p, at 219p.

Key stats
Market capitalisation£1,884m
No. of shares out149m
No. of shares floating143m
No. of common shareholdersnot stated
No. of employees2601
Trading volume (10 day avg.)0m
Profit before tax£119m
Earnings per share80.19p
Cashflow per share99.80p
Cash per share633.07p

*Correct as at 27 Jan 2014

Numis recommends reducing Close Brothers

Numis analysts have marginally increased forecasts for asset manager Close Brothers Group (CBG.L) but warned that now isn’t the right time to own the shares and recommended a reduction.

Analyst James Hamilton placed a ‘reduce’ recommendation on the shares and set a target price of £11.10.

Hamilton increased earnings per share for this year to 102.6p from 102.5p and for next year to 115.2p from 114.8p and although the business is ‘high quality’ it is ‘comparatively counter cyclical and consequently we believe now is the wrong point of the cycle to own it’.

‘Close has played the economic cycle well having largely done the opposite of the clearing banks,’ he said. ‘It avoided the excesses at the top of the cycle and it has grown high margin business through the downturn. We believe that the recent growth phase is nearing an end.’

At the time of writing shares were down 2.38%, or 37p, at £12.70.

Key stats
Market capitalisation£321m
No. of shares out518m
No. of shares floating502m
No. of common shareholdersnot stated
No. of employees3776
Trading volume (10 day avg.)2m
Profit before tax£9m
Earnings per share1.70p
Cashflow per share12.04p
Cash per share0.04p

*Correct as at 27 Jan 2014

Speedy Hire ‘fully valued’ as new CEO takes the wheel

The new chief executive of Speedy Hire (SDY.L) will have to work hard to win over Shore Capital analysts who believe the share to be ‘fully valued’.

Analyst David O’Brien retained a ‘hold’ recommendation on the shares and a target price of 65p.

Former Speedy Hire chief operating officer Mark Rogerson will take on the new chief executive role, replacing outgoing Steve Corcoran. Rogerson has previously worked at Costain and Serco.

‘While Mark has strong experience within the construction and engineering sectors, he has limited experience of hire services, although significantly, he has been client facing at a senior level over a significant period of time,’ said O’Brien.

‘We retain our neutral stance on Speedy Hire, believing the shares to be fully valued.’

At the time of writing shares were down 3.85%, or 2.5p, at 62.5p.

Key stats
Market capitalisation£841m
No. of shares out165m
No. of shares floating158m
No. of common shareholdersnot stated
No. of employees730
Trading volume (10 day avg.)0m
Profit before tax£31m
Earnings per share18.85p
Cashflow per share21.36p
Cash per share15.66p

*Correct as at 27 Jan 2014

Peel Hunt sees Dominos ‘sharing out the dough’

Analysts at Peel Hunt are confident that pizza chain Domino’s Pizza (DOM.L) is on the road to becoming an ‘established mature business’ with benefits for investors.

Analyst Nick Batram retains a ‘buy’ recommendation on the shares and placed a target price of 594p on the stock after being ‘under review’.

He is impressed with Domino’s franchise chain and said that although the impending exit of the CEO and CFO ‘is not ideal’ it is ‘clear these departures are not a reflection of the underlying business’.

‘Domino’s Pizza is so far ahead of the competition in the UK and its infrastructure so efficient that we don’t see its leadership being challenged,’ said Batram.

He also predicts good news for investors with ‘the potential for a c12% capital return on top of a generous dividend’ as Domino’s starts ‘sharing out the dough’.

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