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The Expert View: BT, Blinkx and SABMiller

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by Chris Marshall on Feb 03, 2014 at 05:01

Our daily round-up of analysts recommendations and commentary, also including BAE Systems and Premier Farnell.

Our daily round-up of analyst recommendations and commentary, featuring BT, Blinkx, BAE Systems, SABMiller and Premier Farnell

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Key stats
Market capitalisation£30,017m
No. of shares out7,911m
No. of shares floating7,814m
No. of common shareholdersnot stated
No. of employees87900
Trading volume (10 day avg.)14m
Profit before tax£2,091m
Earnings per share25.49p
Cashflow per share60.15p
Cash per share17.30p

*Correct as at 31 Jan 2014

Nomura ‘encouraging investors to buy BT’

'Buy' BT said analysts on Friday, among them Nomura, after the company reported a rise in sales and profits in the last quarter of 2013.

The company was one of few risers mid-afternoon on Friday, up 3.1% to 382p, after reporting pre-tax profits of £617 million for the last three months of 2013. The company benefited from demand for its broadband and BT Sport service.

Nomura was particularly upbeat on BT shares: 'We expect BT’s growth to take another step forward when more relaxed price controls take effect from April, and again when it relaunches into enterprise and consumer mobile later in the year,' commented analyst James Britton.

'We are encouraging investors to buy BT ahead of it moving towards a growth rating.'

Britton has a target price of 500p for BT.

Key stats
Market capitalisation£508m
No. of shares out399m
No. of shares floating314m
No. of common shareholdersnot stated
No. of employees265
Trading volume (10 day avg.)6m
Turnover120m USD
Profit before tax10m USD
Earnings per share0.03 USD
Cashflow per share0.04 USD
Cash per share0.09 USD

*Correct as at 31 Jan 2014

Blinkx ‘buying opportunity’

Analysts have spotted a buying opportunity in Blinx, the video search group that on Thursday lost one third of its value after allegations about the way it generates advertising revenue.

‘As with any strongly performing, highly rated stock the group is susceptible to volatility and we view the share price movement as a buying opportunity’, said Numis analyst Paul Richards, noting Blinkx was the best performing UK media stock in 2013.

A US blogger published a report which raised concerns about the business model of Blinkx and was taken very seriously by markets. The company subsequently said it ‘strongly refutes the assertions made and conclusions drawn in the blog post’.

The company’s shares shifted a bit higher on Friday, to trade up 7% at 127p by mid-afternoon. Richards’ target price assumes an almost doubling of the shares, to 225p.

Key stats
Market capitalisation£13,620m
No. of shares out3,202m
No. of shares floating3,192m
No. of common shareholdersnot stated
No. of employees84300
Trading volume (10 day avg.)6m
Profit before tax£1,063m
Earnings per share32.63p
Cashflow per share53.50p
Cash per share103.19p

*Correct as at 31 Jan 2014

BAE: uninspiring growth prospects

Shares in defence and aerospace company BAE Systems will underperform, warned analysts at Barclays as they downgraded the stock to ‘underweight’.

Barclays’ analysts said of the company: ‘We do not see a compelling organic growth story as a result of stalling Typhoon exports and high exposure to declining US Army budgets, which disproportionately impact BAE's Land business.’

‘Whilst we're impressed with the self-help activity to date, we believe there is a limit to the cuts BAE can endure, especially in R&D, to support its competitive position and future growth prospects.’

They assign a target price of 380p to the company, below the 425p level BAE was trading at on Friday afternoon.

‘With no positive multiple or earnings catalyst likely, we believe the shares will underperform,’ concluded the analysts.

Key stats
Market capitalisation£43,661m
No. of shares out1,605m
No. of shares floating936m
No. of common shareholdersnot stated
No. of employees70486
Trading volume (10 day avg.)3m
Turnover14,017m USD
Profit before tax1,963m USD
Earnings per share1.22 USD
Cashflow per share1.80 USD
Cash per share0.82 USD

*Correct as at 31 Jan 2014

SABMiller among emerging markets losers

SABMiller, the company behind brands including Fosters and Peroni, is among FTSE 100 companies that will suffer from a slowdown in emerging markets, analysts at Societe Generale warned as they downgraded the stock from 'buy' to 'hold'.

The bank's analysts warned about the outlook for European consumer companies: 'We expect recent emerging market currency weakness to herald a downturn in consumer demand, with a more prolonged period of poor growth in these regions than we had anticipated.'

The company has a bigger exposure to long-term growth in emerging markets than its European and US competitors. Shares fell to £26.99 in Friday’s sell-off.

‘We are concerned that some currency declines will bring imported inflation in consumer categories, hitting sales in 2014,’ said the Societe Generale team as they cut their target price to £31.00 from £36.00.

Key stats
Market capitalisation£799m
No. of shares out371m
No. of shares floating363m
No. of common shareholdersnot stated
No. of employees4464
Trading volume (10 day avg.)1m
Profit before tax£50m
Earnings per share13.50p
Cashflow per share18.50p
Cash per share35.53p

*Correct as at 31 Jan 2014

Premier Farnell fails to win over investors

Premier Farnell failed to win over investors with a mixed pre-close update at the end of last week, in which management said full year profits would be in-line with expectations but cautioned over flat margins.

Analysts at Shore Capital are sticking with a ‘hold’ recommendation for the distributor of technology products and solutions.

The FTSE 250 company reported a 5.2% increase in organic revenue growth in Q4, the fastest rate since Q112. But in tough markets a ‘mixed’ outlook forecast left investors cold and shares had fallen some 8% at the time of writing on Friday, to 215p.

‘The outlook forecast continues to be mixed; we anticipate an acceleration recovery in growth in the core, but management are cautioning on the operating margin being flat on FY2014F (to end January),’ noted Shore’s Robin Speakman, who has a target price of 234p.

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