Citywire printed articles sponsored by:
View the rest of this gallery online at http://citywire.co.uk/wealth-manager/gallery/a646903
The Expert View: Catlin Group, Informa and Bunzl
by Harry Brooks on Dec 20, 2012 at 05:01
A roundup of some of analyst commentary on shares including Halma and Latchways.
Our daily round-up of analyst recommendations and commentary, featuring Catlin Group, Informa, Bunzl, Halma and Latchways.
Canaccord increases target price for Hurricane Sandy-hit Catlin Group
Ben Cohen, analyst at Canaccord, has increased his target price for Catlin Group (CGL.L) in spite of the insurer warning its exposure to Hurricane Sandy would be at the top end of analyst estimates.
Catlin has quantified its loss from Sandy at $200 million, at the top end of the $50 million to $200 million consensus estimate and above Cohen's $175 million prediction. The company's management said the figure remains subject to revision, with reinsurance liability still uncertain.
However, Tuesday's statement also noted that January renewals for US reinsurance has changed from flat to -5% to flat to +5%, and that it has seen 'encouraging rate hardening from the casualty class'.
The analyst's 2012 earnings per share forecast falls by 23% on the basis of Sandy claims, but his 2013 top-line growth prediction rises to reflect the strong growth outlook from the US. His target price rises 2% to 505p.
Shares in the group closed at 500p on Wednesday, up 10.9p or 2.2%.
Westhouse downgrades Informa as shares rise
Roddy Davidson, analyst at Westhouse, has downgraded publisher Informa (INF.L) from 'buy' to 'neutral' following a recent rise in the shares.
Since the interim management statment in October the shares have gained 12%, and over the past month they've outstripped the market by 15%, the analyst noted. Although the trading update saw a reiteration of full-year guidance, strong cash generation and tight cost control, organic revenues fell 2% year-on-year in the nine months to the end of September.
'On this basis subsequent strength appears to have been driven by bid speculation,' Davidson said. 'The fact that INF forecast to grow more slowly than its peers and displays a degree of variability in the quality of its underlying assets should be borne in mind. Limited synergies between its operating divisions also suggest that a more complex buy and break up approach may be required.'
Shares in the group closed at 455.35p on Wednesday, up 6.6p or 1.5%.
Seymour Pierce downgrades Bunzl on earnings miss
Caroline de La Soujeole, analyst at Seymour Pierce, has downgraded outsourcing group Bunzl (BNZL.L) from 'hold' to 'reduce' following a trading update that missed his expectations.
Organic sales growth over the latest quarter fell to -0.8%, taking organic growth for the year as a whole to 2.5%, below the 3.1% the analyst had penciled in. She noted that this was a downward trend, with growth in the first and second quarters of 4.3%, followed by a decline to 2% in the third quarter.
'These results are a touch below our expectations,' de La Soujeole said. 'Reflecting this, we are reducing our forecasts slightly, taking adj pre-tax profit to £317.7 million (previously £319.5 million, consensus £318 million). The shares have had a good run over the past year outperforming the market by 13%. The shares are highly rated in our view, trading on a one year prospective price to earnings of 15.5x FY12E falling to 14.3x, compared with a five year through the cycle average of 13x.'
Shares in the group closed at £10.22 on Wednesday, down 43.9p or 4.1%.
Investec lifts Halma's target price on MicroSurgical Technology acquisition
Chris Dyett, analyst at Investec, has increased his target price for technology business Halma (HLMA.L) following its acquisition of MicroSurgical Technology (MST).
US-based MST, which makes specialist gear for cataract surgery practitioners, will potentially be Halma’s largest-ever acquisition, with a maximum consideration of $100 million.
Dyett backed the acquisition, saying MST has room to grow. 'Historic double-digit revenue growth has been driven by acceptance of the products and the growth in cataract surgery in the US market,' he said. 'The scale of cataract-related blindness in the developing world suggests that growth could accelerate, as the appropriate regional and national product approvals are won and this should also be a driver for other operations within this division.'
On the back of the acquisition the analyst's 2014 earnings per share estimate increases 2.5%, and his target price goes from 460p to 495p.
Shares in the group closed at 454.7p on Wednesday, up 7.9p or 1.8%.
Peel Hunt backs Latchways with 'buy' recommendation
Christopher Bamberry, analyst at Peel Hunt, has initiated coverage of safety products maker Latchways (LTC.L) with a 'buy' recommendation, citing its growing international reach and product development.
The analyst said Latchways has delivered impressive margins (24% in 2012) and a high return on capital (56% in 2012).
'With significant revenue growth opportunities through product development, new market penetration and further geographic expansion, we expect that these will continue into the long term,' he said.
The shares trade on 12.1x estimated 2013 earnings, which Bamberry noted is a 10% discount to the FTSE Support Services sector and a 3% discount to the historical average.
Shares in the group closed at 991p on Wednesday, down 1.5p or 0.2%.