The Expert View: Burberry, WH Smith and Hargreaves Services

Our daily round-up of analyst recommendations and commentary, featuring Burberry, WH Smith, Hargreaves Services, Standard Chartered and Kenmare Resources.

Key stats
Market capitalisation	£4,907m
No. of shares out	442m
No. of shares floating	436m
No. of common shareholders	not stated
No. of employees	7991
Trading volume (10 day avg.)	3m
Turnover	£1,857m
Profit before tax	£264m
Earnings per share	59.33p
Cashflow per share	79.43p
Cash per share	124.65p

*Correct as at 11 Oct 2012

Seymour Pierce upgrades Burberry as sales bounce back

Kate Calvert, analyst at Seymour Pierce, has upgraded luxury fashion retailer Burberry (BBY.L) from 'hold' to 'buy' following an uptick in sales over the past few weeks.

Shares in the company plummeted after it issued a profits warning last month warning of slowing sales over the latest quarter. Although the update records that sales growth only hit 1% year-on-year over the quarter, this was much better than the consensus estimate of a 0.7% decline.

'The shares have fallen 27% since its 11 September update and is trading on an undemanding 2013 price-to-earnings ratio of 14.3x,' Calvert said.

'While there is still uncertainty over the cost of bringing in-house the fragrance licence and over the impact the global economic slowdown will have on luxury spending, we are reassured that demand has not fallen off a cliff and so believe the shares have been oversold.'

Shares in the group closed at £11.03 on Thursday, up 100p or 9.97%.

Key stats
Market capitalisation	£814m
No. of shares out	130m
No. of shares floating	122m
No. of common shareholders	not stated
No. of employees	16273
Trading volume (10 day avg.)	0m
Turnover	£1,273m
Profit before tax	£73m
Earnings per share	51.41p
Cashflow per share	76.76p
Cash per share	29.50p

*Correct as at 11 Oct 2012

Oriel warns WH Smith's set to fall as Swann steps down

Jonathan Pritchard, analyst at Oriel, has warned that shares in high-street stationer and newsagent WH Smith (SMWH.L) are set to decline on news that chief executive Kate Swann is stepping down.

Swann has been with the company for eight years, in which period earnings have nearly trebled. 2003, the first year of Swann's tenure, saw the group post one of the biggest losses its history. She's credited with turning the company around with a renewed focus on sales of core products, as well as expansion in the highly profitable airport and railway station operations.

The announcement was made alongside a strong set of preliminary results showing pre-tax profits for the year to the end of August rose 10% to £102 million, beating consensus forecasts.

However, this good news was completely overshadowed by the loss of Swann, Pritchard said. 'The underlying news is good but market will not take kindly to the departure of Swann. The shares will give up some their gains.' The analyst has a 'reduce' recommendation on the shares.

Shares in the group closed at 626.42p on Thursday, down 25.58p or 3.92%.

Key stats
Market capitalisation	£199m
No. of shares out	27m
No. of shares floating	23m
No. of common shareholders	not stated
No. of employees	2399
Trading volume (10 day avg.)	0m
Turnover	£688m
Profit before tax	£29m
Earnings per share	106.13p
Cashflow per share	200.88p
Cash per share	169.28p

*Correct as at 11 Oct 2012

WH Ireland upgrades Hargreaves Services

Nick Spoliar, analyst at WH Ireland, has upgraded coal miner Hargreaves Services (HSP.L) from 'under review' to 'buy', believing the group has lots of potential to grow even if its Maltby mine in South Yorkshire has to be closed.

Questions were raised about the mine last month when it reported unusually high levels of water, oil and gas at the site. Before this development the company was basking in the glow of strong annual results, leading to a 15% rise in the dividend. The company is now awaiting further geological reports, which are expected at the end of the month.

Spoliar said that the indications are the mine will indeed be closed, but nonetheless he's positive on the shares. 'We believe that there is good each way value in the shares, ie, whether the mine is closed or not, and are returning our recommendation to Buywith a new risk-based 990p price target.'

The analyst said if the mine is closed it would remove long-term concerns about the group and allow it to focus on energy-related logistics and engineering services.

Shares in the group closed at 725p on Thursday, up 5p or 0.69%.

Key stats
Market capitalisation	£33,364m
No. of shares out	2,393m
No. of shares floating	2,377m
No. of common shareholders	not stated
No. of employees	86918
Trading volume (10 day avg.)	3m
Turnover	10,363m USD
Profit before tax	2,967m USD
Earnings per share	1.24 USD
Cashflow per share	1.42 USD
Cash per share	12.41 USD

*Correct as at 11 Oct 2012

Investec reiterates 'buy' on Standard Chartered, praises African promise

Ian Gordon, analyst at Investec, has reiterated his 'buy' recommendation on Standard Chartered (STAN.L), saying a recent presentation on the bank's African operations highlighted huge scope for growth on the continent.

'The market appears to have largely ignored STAN’s Africa Day, which seems a little rude! If you expect STAN to deliver 10%+ revenue and unlimited earnings per share growth through 2012-14... then Tuesday’s presentations offered fresh support - encouraging belief that the African contribution can grow at twice that rate,' he said.

In constant currency terms Standard's consumer banking operation on the continent recorded a 46% rise year-on-year in the first half of this year, hitting $78 million. The bank plans to have 300 branches by 2015 compared with 188 today, and new branches are breaking even in under a year, reflecting 4-6% deposit margins, Gordon said.

Standard Chartered is a top-10 holding in Citywire star pick fund Ecclesiastical Higher Income, which is managed by Robin Hepworth.

Shares in the group closed at £13.96 on Thursday, up 16.5p or 1.2%.

Key stats
Market capitalisation	£937m
No. of shares out	2,530m
No. of shares floating	2,452m
No. of common shareholders	not stated
No. of employees	736
Trading volume (10 day avg.)	3m
Turnover	105m USD
Profit before tax	15m USD
Earnings per share	0.01 USD
Cashflow per share	0.01 USD
Cash per share	0.02 USD

*Correct as at 11 Oct 2012

Canaccord says 'buy' Kenmare Resources as production surges

Jeremy Dibb, analyst at Canaccord, has reiterated his 'buy' recommendation on mining group Kenmare Resources (KMR.L) following the publication of an encouraging production update.

Dibb focused on strong production levels of ilmenite, a mineral used to make titanium dioxide, uses for which include paint pigment and skin-care products. Production of the mineral rose 21% quarter-on-quarter, the third best ever quarter achieved at the mine.

Although global demand for pigment has been contracting, Dibb said ilmenite has benefited as producers have sought cheaper feedstocks.

'This is supporting ilmenite demand relative to slag and rutile prices, as ilmenite remains the cheapest source of titanium dioxide on a relative economic basis,' he added.

'We continue to believe operations are on track to deliver guided production. We maintain our BUY recommendation and 54p target price.'

Shares in the group closed at 36.51p on Thursday, down 2.04p or 5.29%.