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The Expert View: Glencore, Mothercare and Regus
by Michelle McGagh on Apr 09, 2014 at 05:01
Our daily roundup of the best analyst commentary on shares, also including Advanced Computer Software and Impax Asset Management.
Investec says Glencore Xstrata shares ‘fully valued’
Investec’s review of mining company Glencore Xstrata (GLEN.L) has led it to downgrade the target price and reduce anticipated earnings for 2014.
Analyst Marc Elliott retained a ‘reduce’ recommendation and placed a target price of 300p on the shares, down from 327p. The shares were trading broadly flat yesterday at 316p.
‘After reviewing our commodity price deck and updating our estimates, we downgrade our target price – reducing earnings for 2014, but upgrading slightly thereafter,’ he said. ‘We see a risk of further downgrades given current weak and volatile pricing of coal and copper. Management is still working towards selling major asset [Peruvian copper mine] Las Bambas, which is important as it should inject significant cash…contributing to funding other opportunities management are likely reviewing.’
He added: ‘Longer-term we see good reason to invest but the shares currently appear fully valued.’
Contract win bolster Advanced Computer Software
IT solutions provider Advanced Computer Software (ASW.L) is cementing itself in new markets, securing two contracts with community and mental health trusts.
Panmure Gordon analyst Adam Lawson retained a ‘buy’ recommendation and a target price of 139p on the shares following the contract wins with the two unnamed trusts which he said provided ‘further evidence of the company’s growing presence in this market following last month’s win at Oxford Health Foundation Trust’. Yesterday the shares were down 4.3p, or 3.5%, at 117p.
The wins follows positive full-year trading results on 18 March ‘which indicated an outturn comfortably in line with expectations, thereby placing short term earnings firmly on the upside’, said Lawson.
Regus strategy is smart not megalomaniacal, says Jefferies
Serviced office business Regus (RGU.L) has expanded rapidly in 2013 but investor suspicion of the rapid growth is misplaced, according to Jefferies.
Analyst Justin Jordan reiterated a ‘buy’ recommendation and a target price of 280p on the shares, which were trading down 4.1p, or 1.9%, at 219p yesterday.
‘We believe investor suspicion of Regus growth plans (448 new centres in 2013) being megalomania misses a key point: today’s self-financed expansion is tomorrow’s mature earnings per share growth,’ he said.
Regus management has signalled it will add another 300 centres this year which Jordan said ‘remains the right strategy for Regus to capitalise on the structural shift to more flexible working space and improving macro globally’.
Significant downside risk on Mothercare shares
Cantor has reiterated its ‘sell’ recommendation for Mothercare (MTC.L) saying the childrenswear retailer is ‘running out of options’.
Ahead of the retailer’s fourth quarter update analyst Mike Dennis has reiterated his ‘sell’ and cut the target price of the stock to 151p from 200p. The shares were down 10p, or 6.1%, at 161.5p yesterday.
Dennis said he expected ‘another poor trading update’ with sales down 7% like-for-like on the third quarter.
‘The interim chief executive Mark Newton-Jones, has… numerous challenges to confront. There is room for further downgrades if trading has continued to deteriorate and costs have been incurred trying to sell Early Learning Centre,’ he said.
‘Mothercare’s share price still has a significant downside risk as any Early Learning Centre deal could lead to further asset write-downs and expose Mothercare’s weak balance sheet.’
Impax a ‘key pick’ after strong quarter
Impax Asset Management (IPX.L) has issued a strong trading update with growth in assets under management ahead of schedule.
Peel Hunt analyst Stuart Duncan retained a ‘buy’ recommendation and a target price of 60p. The shares were trading flat yesterday at 56.9p.
Assets have grown 6% over the quarter to 31 March to sit at £2.5 billion ‘in effect hitting our year-end assumption six month ahead of schedule’, said Duncan.
‘[The] trading update shows continuing momentum within Impax’s business,’ he said. ‘Net flows have remained healthy and full-year expectations remain well underpinned.’
He added that Impax ‘remains a key pick for the year ahead’.