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The Expert View: BP, Walker Greenbank and Bodycote
by Michelle McGagh on Apr 30, 2014 at 05:01
Our daily roundup of the best analyst commentary on shares, also including Euromoney and Renew Holdings.
BP divi up but not enough to increase Liberum rating
The BP (BP.L) dividend increase has been welcome by investors but Liberum has noted the uplift was not as much as hoped.
Analyst Andrew Whittock retained a ‘hold’ recommendation and a target price of 500p on the shares, which were trading up 0.5% at 491p yesterday.
The petrol giant released first quarter results which showed adjusted net income of $3.2 billion, beating consensus by 4%, and an increase in the quarterly dividend by 3% to $0.0975 a share.
‘The Q1 results look in line and solid although the dividend increase was less than we hoped,’ said Whittock. ‘Cash generation was good. Few operational surprises. Our initial reaction is that we expect only small changes to forecasts and to retain our “hold” recommendation.’
BP did not make any new comment on the situation in Russian or update 2014 guidance in the Q1 results although management remained ‘confident that “material” growth in operating cash flow, coupled with disciplined investment’ would deliver growth, said Whittock.
Euromoney is down, definitely not out
Business magazine publisher Euromoney Institutional Investor (ERM.L) has been upgraded by Peel Hunt after shares fell 21% since the beginning of the year.
Analyst Malcolm Morgan upgraded his recommendation to ‘buy’ from ‘hold’ and placed a target price of £12.50 on the shares. The stock was up 1.7% yesterday at £11.08.
‘Since a high of £13.88 at the turn of the year, the shares have fallen 21% versus the FTSE All Share, which is down less than 1% over the same period,’ said Morgan. ‘This is despite no material change to guidance – albeit cautious in tone. Interim results on 15 May have been previewed by the company and set the scene for 5% headline revenue growth and a decline in margin, reflecting the investment being made.’
Morgan added that he was ‘cognisant of both the company’s fundamental strength – limiting downside – and the ungeared balance sheet offering the capacity to fund a material acquisition’.
Renew’s acquisition wins Numis upgrade
Engineering services provider Renew Holdings (RNWH.L) has been upgraded after the acquisition of Clarke Telecom, which supplies engineering services to telecoms companies.
Numis analyst Howard Seymour increased his rating from ‘add’ to ‘buy’ and raised the target price of the stock from 215p to 260p. Yesterday shares in the company shot up 9.3% to 236p.
‘The acquisition of Clarke Telecom will be earnings enhancing by some +16% and in our view the investor focus should be on how Renew is exploiting its business model strength to add complementary engineering services into growth areas,’ said Seymour.
‘Hence while Renew’s organic opportunities remain significant, Clarke is a further move to provide a range of self-delivered services that boost the engineering services margin and growth proposition.’
Seymour added that the organic and acquisitive potential of Renew was better than most peers’ thanks to its ‘business model of providing essential services with high barriers to entry into key markets’.
Investment continues to pay off for Walker Greenbank
Home furnishing manufacturer Walker Greenbank (WGB.L) has delivered a fourth year of double-digit profits, prompting Investec to increase its target price.
Analyst Nicola Mallard retained her ‘buy’ recommendation but increased the target price from 182p to 213p as investment in marketing and manufacturing pays off for the company. Shares were yesterday up 3.5p, or 1.9%, at 192.5p.
‘Investment in brands, marketing and the manufacturing asset base are paying dividends with a fourth year of double-digit profit growth delivered, despite a variable economic backdrop,’ said Mallard. ‘The balance sheet also remains in good shape, with net cash. The group has made an encouraging start to the year and we increase our profit before tax forecasts by 3% in full year 2015 and 5% in full year 2016.’
Full year results for 2014 were slightly ahead of expectations with profits before tax of £7.3 million versus Investec expectations of £7.2 million.
More to come from Bodycote after ‘unexciting’ results
While markets were indifferent to first quarter results from thermal processing firm Bodycote (BOY.L), Jefferies believes there is more to come from the company.
Analyst Andy Douglas reiterated a ‘buy’ recommendation and retained a target price of 895p on the shares, which were down 1.8% at 736p.
The first quarter 2014 interim management statement reported growth of around 3% which Douglas described as ‘neither exciting nor a disaster’.
‘Evidently foreign exchange impacted the Q1 reported performance, however we are relaxed with year-to-date trading and believe that with a number of end markets likely to trend positive through the year, there is more to come from Bodycote,’ he said.
Douglas added that the accompanying conference call was ‘more confident’ than the interim management statement may have suggested.