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The Expert View: easyJet, Booker Group, Ladbrokes
by Michelle McGagh on Jan 17, 2014 at 05:00
A round-up of the best analyst commentary on shares, also including Halfords and Polar Capital.
Our daily round-up of analyst recommendations and commentary, featuring easyJet, Booker Group, Ladbrokes, Halfords and Polar Capital.
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Booker a ‘buy’ as Makro shines
Investec has reiterated its ‘buy’ recommendation for food wholesaler Booker Group (BOK.L) after its Q3 trading update showed the positive impact of its recent acquisition of Makro.
The company reported growth broadly in line with the level it achieved in the first half of the year but Makro – the cash and carry firm that Booker acquired last year – is still the star player, providing 19.1% of growth.
‘The group comments that the Makro turnaround is running to plan,’ said analyst Nicola Mallard. Non-tobacco revenue for Makro are still declining as the group sheds unwanted (non-profitable) saes. Cash and profits at Makro continue to improve.’
Mallard placed a target price of 172p on the shares as she said the group is ‘running ahead of our 2H forecast growth’ and has led Investec to upgrade not just 2H forecasts but also the assumptions for FY15 and FY16.
Booker shares ended down 0.94%, or 1.5p, at 158p on Thursday.
Ladbrokes: some reassurance, but caution warranted
Bookmaker Ladbrokes (LAD.L) has said it will keep this year’s dividend in line with 2013 as Barclays analysts cautiously pin digital hopes to the second half of the year.
In a brief post-close trading statement Ladbrokes confirmed that the dividend would remain at around 8.9p this year and that it is on track to upgrade its machines in time for the World Cup in June.
The company launched a new mobile offer in December last year but analyst Patrick Coffey said the company’s online turnaround has been slower than expected.
‘The bull case hinges on the online division growing rapidly over the next three years but we remain cautious,’ he said. ‘Execution risk remains and any further delays could lead to a de-rating of the shares. That said the company had confirmed it remains on track to deliver against its strategic priorities in H1, which the company hopes will drive digital performance through H2 and beyond.’
Coffey added that the statement is ‘likely to reassure for now’ and maintained an ‘underweight/negative’ recommendation and placed a target price of 169p on the shares.
Ladbrokes shares ended up 4.22%, or 7.2p at 180p on Thursday.
EasyJet flying high as Numis upgrades to ‘add’
Numis has upgraded easyJet (EZJ.L) from a ‘buy’ to ‘add’ recommendation as it predicts another good summer for the budget airline.
Wyn Ellis, analyst at Numis, placed a target price of £19.00 on the shares, up from £16.00, following a 33% rise in the stock since November.
EasyJet had a strong 2013 as rival Ryanair made cautious noises and even paid out a special dividend. Although Ellis is expecting the airline’s Q1 update to include seasonal losses he believes the company has further to go this year.
‘We believe that it is shaping up to be another good summer, that earnings risk is on the upside and that the share price momentum will continue,’ he said, pointing out the quality routes the airline is running and increased business traffic.
easyJet shares closed down 0.65%, or 11p, at £16.74 on Thursday.
Halfords relies on pedal power to bolster Q3 figures
Cantor has increased its target price for Halfords (HFD.L) shares after cycling helped power Q3 results.
Analyst Freddie George increased the target price from 410p to 500p but maintained his ‘hold’ recommendation.
George also raised 2014 pre-tax profit forecasts from £65 million to £72 million on the strength of Halfords’ cycle business.
‘The Q3 trading update was marginally better than our forecasts helped by an outstanding performance in cycling,’ he said. Halfords core car market also brought increased sales and car maintenance was also improved, however car enhancement’ sales were down due to the ongoing decline in sat nav sales.
George said the valuation of the shares ‘reflects a strong recovery in the earnings over the next three years’ and the target price has been increased in view of the earnings upgrade.
Halfords shares soared on Thursday, ending the day up 7.21%, or 33.2p, at 494p.
Polar Capital a ‘hold’ as future of inflows uncertain
Investment manager Polar Capital (POLR.L) has managed to secure $1 billion of net inflows in Q3 but concerns about Japan hang over the company.
Panmure analyst Jeremy Grime maintained his ‘hold’ recommendation and set a target price of 520p on the shares.
Despite the large inflows, $1 billion marks a reduction on previous quarters and ‘Polar has flagged the unsustainability of recent exceptional inflows which declined in Q3 but remained relatively strong nevertheless’, said Grime.
The Japan fund makes up 40% of assets under management (AUM).
The shares have been very strong recently on the back of the rapid growth of AUM which has been the strongest of the smaller asset managers,’ said Grime.
‘They now trade on nearly 20x this year’s earnings. Falling to 16x next year, which is above our 520p price target. AUM growth will need to be sustained to maintain this rating.’
Shares ended the day up 1.16%, or 6.5p, at 564.5p.