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The Expert View: Cineworld, Barclays and Beazley
by Michelle McGagh on May 09, 2014 at 05:01
Our daily roundup of the best analyst commentary on shares, also including LSL and SuperGroup.
Buy Cineworld after blockbuster results, says Numis
After a recommendation to ‘buy’ Cineworld (CINE.L) shares last week, Numis analysts have once again flagged the stock.
Analyst Douglas Jack retained a ‘buy’ recommendation and increased the target price from 380p to 420p. Shares were up 1.1% yesterday at 346.3p.
‘Last week, we said Cineworld’s share price offered a buying opportunity, but in light of [ yesterday’s trading statement] that claim was not strong enough,’ he said. ‘During the first 18 weeks [of the year] Cineworld’s box office outperformed a flat UK market by 7% and the company is generating double-digit like-for-like admission growth in Europe.’
Jack added that there are ‘strong like-for-like trading prospects’ over the next 20 months and ‘we would still buy the shares’.
Investec excited by Barclays cost-cutting plans
Investec is excited by Barclays’ (BARC.L) plans to cut costs of £16.3 billion by 2015, driven by 19,000 job losses at.
Barclays chief executive Antony Jenkins yesterday unveiled a radical restructuring involving the creation of a ‘bad bank’ which will sell or run down £115 billion of non-core operations.
Investec analyst Ian Gordon dismissed the creation of the bad bank as ‘merely packaging’ but said the ‘emboldened commitment’ to cut costs ‘does escite us’.
‘Barclays may soon resemble the Emirates Stadium with 20 minutes left to play – there will be over 20,000 empty seats,’ he said. ‘Barclays is already a low-risk, profitable bank, but the “reset” is about rightsizing the bank to reflect smaller addressable investment banking revenue pool and to deliver improved/sustainable returns.’
Gordon retained a ‘buy’ recommendation and a target price of 295p on the shares, which jumped 7.9% yesterday to 262.5p
Beazley upgraded as it focuses on specialty insurance
Insurer Beazley (BEZG.L) has been upgraded as analysts predict further capital returns.
Peel Hunt analyst Mark Williamson upgraded the stock from ‘hold’ to ‘buy’ and placed a target price of 269p on the shares, which were trading up 2% at 246p yesterday.
He said he was impressed by the lines of business Beazley was pursuing.
‘We are reinstating our “buy” recommendation, with 11% upside to our 269p price target and the prospect of further capital return, assuming normal loss distribution through the remainder of the year,’ said Williamson.
‘Beazley is well positioned being underweight [catastrophe] reinsurance line and overweight specialty lines that are witnessing rate improvement. It has an unmatched underwriting track record coupled to a prudent approach to reserving.’
LSL shrugs off mortgage tightening to benefit from property boom
Residential property services provider LSL (LSL.L) is expected to benefit further from the rising property market, with little concern about stricter mortgage rules hampering the market.
Jefferies analyst Anthony Codling retained a ‘buy’ recommendation and a target price of 650p after LSL issued its trading statement. Shares were trading down 0.6% at 417.3p yesterday.
Codling said the mortgage market review (MMR) was the only cloud in the property market.
‘LSL [yesterday] reported that the group was performing well in the recovering UK housing market. With house prices and transaction levels rising and a national footprint, we believe that LSL is well placed to benefit from the improving trends across the market,’ he said.
‘Professional indemnity costs are tracking in line with expectations; we expect the MMR clouds on the horizon to clear reasonably quickly. At [a share price] of 420p, there is 55% upside to our 650p price target.’
Fourth quarter not-so-super for SuperGroup
Shares in fashion retailer SuperGroup (SGP.L) have been weak recently and Liberum believes there are better picks out there after weak fourth quarter performance.
Analyst Sanjay Vidyarthi maintained a ‘hold’ recommendation and target price of £11.50 on the shares. Shares plunged 12.3% yesterday, falling to £11.82.
He noted the weak fourth quarter performance and that the owner of SuperDry and Cult Clothing had suffered reduced sales by failing to discount clothing in its stores, although by doing so it has retained its margin.
‘On the back of a weaker than expected Q4 retail performance, we cut our full year 2014 earnings per share by 2.4%, in line with company guidance,’ he said. ‘Our sense is that, in a promotional retail environment, SuperGroup has sacrificed some sales, while preserving gross margin.’
Vidyarthi added that the shares had been ‘weak of late’ and ‘our preference remains for Ted Baker and Sports Direct’.