Citywire printed articles sponsored by:
View the rest of this gallery online at http://citywire.co.uk/wealth-manager/gallery/a698335
The Expert View: Bovis, Tesco and Ophir Energy
by Harry Brooks on Aug 20, 2013 at 05:01
A roundup of some of the best analyst commentary on shares, also including Amec and Rolls-Royce.
Our daily round-up of analyst recommendations and commentary, featuring Bovis, Tesco, Ophir Energy, Amec and Rolls-Royce.
If you'd like to receive news alerts on any of the stocks mentioned in The Expert View, click on the star icons below to add them to your favourites. To buy shares via JP Morgan, click on the shopping trolley icon.
'Hold' Bovis for now, Peel Hunt urges
Even a 50% rise in operating profits hasn't persuaded Peel Hunt's analysts to upgrade Bovis Homes (BVS.L) from 'hold'. The home builder yesterday reported strong results on the back of a revitalised UK housing market.
'A 50% rise in operating profits can never be sniffed at especially as there is more to come in H2, particularly on the margin front,' Clyde Lewis acknowledged.
However, he said the more important metric is return on equity (RoE), which he doesn't see rising just yet.
'Bovis is the second cheapest housebuilder in the sector on 1.3x for 2013 (behind Redrow), which reflects the poor RoE (the lowest in the sector at 7.5% post tax for 2013e).
'On our current forecasts we have the RoE improving nicely in the next couple of years (to 10.7% in 2015e) but it looks like it will continue to lag the peer group average. Hold for now.'
Shares in the group closed at 762p on Monday, down 16.5p or 2.1%.
Tesco set to launch iPad-style tablet
Launching an iPad-style tablet computer could be just the thing to help Tesco (TSCO.L) reach out to 'Y Generation' shoppers, according to Cantor Fitzgerald.
The Sunday Times has reported that Tesco is looking to launch an iPad-type device in time for Christmas, and analyst Mike Dennis reckons it'd be a good move, saying it'd represent 'a major step forward' in building customer loyalty via smart devices.
'An iPad device should help Tesco exploit its recent technology acquisitions;Blinkbox, Mobcast, We7 and support its new range of financial services as wellas support its electronic and telecom sales,' he noted, adding that Tesco has a heavyweight hardware partner in the shape of South Korea's Samsung.
Although Apple and Amazon are the runaway leaders in the space, Dennis said Tesco has plenty of scope to compete. 'We believe Tesco is well placed to benefit from launching a smart device as it can subsidise the initial costs with Clubcard points and other product offers so as to gain significant market share within this rapidly growing and evolving digital market.'
Shares in the group closed at 366.2p on Monday, down 2.1p or 0.6%.
UBS cuts target price for Ophir Energy
UBS has reduced its target price for oil explorer Ophir Energy (OPHR.L) following a disappointing first-half update.
Last week's update showed an interim pre-tax loss of $19 million, somewhat better than the $24 million loss it recorded a year ago. The company still plans to partner with BG Group off the Tanzanian coast, but the update confirmed a delay with the drilling schedule and caution over the scale of its reserves.
'There were few redeeming features to the 1H13 update,' analyst Daniel Ekstein said.
'Oil exploration is risky and drill decisions must be thoroughly evaluated. As seismic data is processed it is natural for technical views to evolve. Consistently negative revisions, though, imply overly aggressive prior messaging.'
Although he said Ophir isn't a bad explorer, and that upside has been deferred rather than erased, Ekstein reduced his target price from 375p to 340p and reiterated his 'neutral' stance on the shares.
Shares in the group closed at 304.7p on Monday, down 25.3p or 7.7%.
Kentz snubs Amec's takeover bid
Shore Capital has reiterated its 'hold' recommendation on oil and gas specialist Amec (AMEC.L) after its bid for engineering firm Kentz (KENZ.L) was rejected.
Amec's bid valued Kentz at up to £680 million, a premium of around 20% to the current market capitalisation of £560 million. Germany's M+W Group also approached Kentz, but the board rejected both offers, saying they undervalued the business.
Shore Capital analyst Gavin Jago said the rejection means all eyes will be on Amec's next move: 'We will watch with interest as AMEC aims to bridge the gap to 100p of earnings by the end of 2014 (which management has stated will be done through acquisition, share buybacks, or a combination of the two),' he said.
Shares in the group closed at £10.82 on Monday, down 2p or 0.2%.
'Buy' Rolls-Royce, Galvan says
Rolls-Royce (RR.L)’s world-leading expertise in high-efficiency aircraft engines, coupled with a booming civil aviation sector, makes the engineering business a 'buy', according to Galvan Research.
Even though the shares have taken on almost 25% since the start of the year, Galvan's Thomas Light believes the technicals look positive: 'After coming up from under 900p at the start of the year, Rolls Royce shares have been consolidating within a 1,120p-1,240p range since May,' he said.
'The view currently is that while there is no sustained price action back below 1,100p, a return to the best share price levels of the year over the early autumn looks likely.'
The rise in the shares despite the Serious Fraud Office’s ongoing probe into Rolls-Royce’s sales practices in Indonesia and China demonstrate investors' confidence in the engineer, he added.
Light has a target price on the shares of £12.40, and a stop-loss of £10.80.
Shares in the group closed at £11.27 on Monday, up 6p or 0.5%.