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The Expert View: Debenhams, Premier Oil and St James's Place
by Harry Brooks on Oct 25, 2013 at 05:01
A roundup of analysts' commentary on shares, also including Tate & Lyle and Caretech.
Our daily round-up of analyst recommendations and commentary, featuring Debenhams, Premier Oil, St James's Place, Tate & Lyle and Caretech.
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Debenhams has chance to close valuation gap, Peel Hunt says
2012 was one to remember for holders of Debenhams (DEB.L) shares, which virtually doubled in value over the year. This year started badly, but the shares have made good progress over the past six months, and Peel Hunt says there's further to go.
Yesterday's annual results were in line with what the analysts had expected: pre-tax profits down 2.7% year-on-year to £154 million, including the benefit of £11.3 million pension credit. Group like-for-like sales were up 2%. Chief executive Michael Sharp said he was pleased with the results given what he called 'very difficult conditions'.
Peel Hunt analyst John Stevenson was bullish on the prospects for the department store. 'With momentum in store openings, online and the refurbishment programme benefits picking up in FY2014E, Debenhams has a chance to close the valuation gap once again.'
'Trading on circa 11x, Debenhams continues to trade on a material sector discount, although the business needs to show consistent forward momentum in order to close the gap.' The analyst has a 'hold' recommendation on the shares, and his target price rises from 100p to 120p.
The market, however, didn't share Stevenson's optimism: the shares closed at 101p on Thursday, down 9.7p or 8.8%.
Liberum Capital upgrades Premier Oil
Liberum Capital has upgraded Premier Oil (PMO.L) from 'sell' to 'hold', saying the shares now look close to fair value.
Wednesday's interim management statement from Premier Oil cut the production guidance for the year from 63 million barrels of oil equivalent per day to 57 million-59 million as both Huntington (in the UK Central North Sea) and Chim Sao (Vietnam) were hit by gas pipeline issues that should be resolved shortly. The shares dropped about 3% on the update.
'We remain concerned development projects will limit leverage to new ventures,' Liberum's Andrew Whittock said.
'However, the share price is now within 10% of our price target [300p] and we have raised our recommendation to HOLD (from Sell).'
Shares in the group closed at 334.9p on Thursday, up 6.4p or 1.9%.
St James's Place hits new highs
Shore Capital has hailed what it called another another 'wonderful' set of new business figures from wealth management business St James’s Place (SJP.L).
New business over the third quarter rose 23% to £203.9 million, and net inflows of £1 billion helped to power assets under management to a new record.
'Another excellent performance by this strongly managed wealth management group,' Shore Capital's Eamonn Flanagan said.
'Trading at a 24% premium to our 2013F net asset value of 545p dropping to a 15% premium for 2014 (vs 590p), with a 2.4% forward yield (vs 16p) we expect the shares to perform well this morning and reiterate our BUY recommendation on the stock.'
Shares in the group closed at 679p on Thursday, up 2.5p or 0.4%.
Panmure Gordon upgrades Tate & Lyle as shares slide
Panmure Gordon has upgraded Tate & Lyle (TATE.L) from 'sell' to 'hold' following a slump in the shares over the past few months.
Analyst Damian McNeela noted that the shares have underperformed the UK market by 8% since the end of May, with the valuation metrics now looking quite different.
'We think the current valuation of 13.2x price to earnings and 8.4x enterprise value to earnings for 2014 and 15% to its peer group on an enterprise value to earnings basis looks more reasonable,' he said.
'We move our recommendation from Sell to Hold but are maintaining our 750p price target.'
Shares in the group closed at 790p on Thursday, up 4.5p or 0.6%.
Investec downgrades Caretech
Investec has downgraded care home operator CareTech (CTH.L) from 'buy' to 'hold', saying the shares are now up with events having taken on more than 50% since the start of the year.
The company's preliminary pre-close trading update for the 12 months to September 2013 said trading has been in line with expectations and that 2014 momentum in the group will be underpinned by the recent property acquisitions.
'We perceive forecast risk as lessening and up the multiple applied in our rolling 12m enterprise value to earnings model to 9x from 8.5x,' Investec's Nicholas Keher said.
'This drives our target price of 230p [was 214p] and Hold recommendation. We think the recent share price rise has captured much of the near term upside potential and suspect the shares may mark time, for now.'
Shares in the group closed at 231p on Thursday, down 0.5p or 0.2%.