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The Expert View: Blinkx, IGas, Ashmore

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on Jan 15, 2014 at 05:00

A round-up of the best analyst commentary on shares, also including Capita and Barratt Developments.

Our daily round-up of analyst recommendations and commentary, featuring RBS, Aggreko, JD Sports, Max Petroleum and Senior.

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Key stats
Market capitalisation£2,549m
No. of shares out707m
No. of shares floating330m
No. of common shareholdersnot stated
No. of employees251
Trading volume (10 day avg.)1m
Profit before tax£202m
Earnings per share28.68p
Cashflow per share29.66p
Cash per share70.80p

*Correct as at 14 Jan 2014

Ashmore faces earnings downgrade as outflows disappoint

Ashmore Group (ASHM.L) is facing another earnings downgrade from analysts at Numis on an expected fee decline and after the asset manager reported net outflows of $3.5 billion from its funds in the last three months of 2013.

Numis analyst David McCann maintained his ‘hold’ recommendation and placed a target price of 390p after Q2 assets under management came in 6% light of his forecast of $73.5 billion (£44.7bn) and net outflows reached $3.5 billion (£2.1bn), compared to the $1.4 billion (£850m) inflows predicted.

‘The CEO says however he is still confident for the year ahead given that he believes there is now more certainty with regards to US monetary policy,’ said McCann.

But McCann is not convinced and after a 5% earnings forecast is considering another cut: ‘Overall…a disappointing statement and we expect to cut out annualised EBITDA forecasts by 5-10% as a result (noting that we are already at the lower end of consensus).’

‘We view Ashmore as a core long-term holding, but one which we believe offers only fair value today’, he summed up.

Shares slumped 12.43%, or 50.8p, on Tuesday to end at 358p.

Key stats
Market capitalisation£795m
No. of shares out399m
No. of shares floating313m
No. of common shareholdersnot stated
No. of employees265
Trading volume (10 day avg.)3m
Turnover120m USD
Profit before tax11m USD
Earnings per share0.03 USD
Cashflow per share0.04 USD
Cash per share0.09 USD

*Correct as at 14 Jan 2014

Blinkx downgraded on transparency confusion

Video search and online advertising company Blinkx (BLNX.L) has been downgraded from buy to hold by Jefferies after a ‘lack of transparency’.

Analyst David Reynolds maintained his target price of 190p but raised concerns that there is ‘little in the way of disclosure as to Blinkx’s key network partners, revenue contribution and criticality to the model’.

He also highlighted confusion over Blinkx’s H1 2014 interims, which show premium revenue [premium video content] increased 34.6% versus 61.6% for conventional revenue [conventional video content], and likewise premium interactions were up just 11.1% versus 58.2% for conventional.

‘Perhaps [I’m] just being dumb, but I don’t get it, when all the commentary focuses on rampant online video ad growth, and growth comparison looks strange,’ said Reynolds.

He added that he was ‘happy to forego some potential future returns’ in favour of more transparent opportunities.

Blinkx shares ended Tuesday down 4.78%, or 10p, at 199p.

Key stats
Market capitalisation£276m
No. of shares out203m
No. of shares floating96m
No. of common shareholdersnot stated
No. of employees162
Trading volume (10 day avg.)1m
Profit before tax£-18m
Earnings per share-11.11p
Cashflow per share-4.96p
Cash per share5.27p

*Correct as at 14 Jan 2014

IGas explores potential with shale gas deal

Canaccord analysts have maintained a buy recommendation but lowered their target price for shares in British oil and gas explorers IGas (IGAS.L) as it becomes the first company to start shale gas exploration in the Midlands.

IGas has teamed up with French oil giant Total in a $46 million (£28 million) deal to dig for shale gas in Lincolnshire, the first shale gas exploration outside of the North West of England where Centrica and GdF both have positions. It is also the first time a major oil company has shown interest in Britain’s shale gas reserves.

‘Total is to pay up to $1.6 million (£0.95m) in back costs and fund a fully carried work programme of up to £46.5 million,’ said analyst Charlie Sharp. ‘After completion IGas will have a 14.5% working interest in the licences and become operator, with Total taking on that role only after the carried work programme. The licences have considerable…shale gas potential.’

While sharp has maintained a buy recommendation on the IGas shares he has lowered his target to 170p from 180p.

Shares in IGas soared 7.69%, or 9.75p, to end at 136.5p on Tuesday.

Key stats
Market capitalisation£6,853m
No. of shares out659m
No. of shares floating649m
No. of common shareholdersnot stated
No. of employees47590
Trading volume (10 day avg.)1m
Profit before tax£236m
Earnings per share36.68p
Cashflow per share62.82p
Cash per share113.86p

*Correct as at 14 Jan 2014

Capita contract win provides five year boost

Analysts at Peel Hunt have maintained their buy recommendation for outsourcing giant Capita (CPI.L) after it was awarded a five-year London congestion charge contract worth £145 million.

Analyst Christopher Bamberry placed a target price of £10.85 on the shares following the new link up with Transport for London, which has the ability to extend the contract for another five years.

Capita will take responsibility for the scheme in 2015 but Bamberry said it had major contracts to fulfil before then.

‘This further win continues to underpin growth in future years,’ said Bamberry. ‘Given the level of work already booked for 2014 the buoyant sales environment and the acquisition pipeline, in our opinion there is upside potential to current forecasts.’

Capita shares moved up marginally by 0.48%, or 5p, to end Tuesday at £10.42.

Key stats
Market capitalisation£3,754m
No. of shares out984m
No. of shares floating949m
No. of common shareholdersnot stated
No. of employees5000
Trading volume (10 day avg.)3m
Profit before tax£75m
Earnings per share7.51p
Cashflow per share7.67p
Cash per share30.05p

*Correct as at 14 Jan 2014

Barratt shareholders in line for higher dividends

A strong six month trading statement means investors in housebuilder Barratt Developments (BDEV.L) are likely to benefit from increasing dividend income.

Gavin Jago, analyst at Shore Capital, maintained a buy recommendation and target price of 381p on the shares after the company reported a 37% increase in the net private reservation rate for homes in the last six months of 2013 and an improvement in pricing of between 1.5% and 2% compared to last year.

‘The increase in sales rate has been experienced across all of Barratt’s six operating regions and we note that the Help to Buy scheme has been used on 29% of completions in the period,’ said Jago.

He added that the improved sales leaves Barratt with a ‘healthy’ forward order book of £1.3 billion.

‘We expect strong earnings growth over the medium term, which should lead to increasing dividend income for shareholders.’

Shares closed up 1.57%, or 6p, at 387p on Tuesday.

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