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The Expert View: Goals Soccer Centres, Anglo American and Aga
by Chris Marshall on Mar 10, 2014 at 05:01
Our daily roundup of analysts' share recommendations and commentary, also including Headlam and Michael Page International.
Goals Soccer Centres: no longer worth buying
‘Hold’ shares in Goals Soccer Centres (GOAL.L), said analysts at Panmure Gordon, stripping the operator of 5-a-side football centres of their previous buy recommendation after a strong run for the stock.
‘The shares have had a strong run outperforming the FTSE All Share by 22% over the last three months,’ noted analysts led by Karl Burns.
‘Whilst Goals still offers a c8% FCF yield and a three year EPS CAGR of 9.7%, headline multiples are more demanding and from a cash flow perspective we feel Goals is now fairly valued,’ he explained
Forthcoming 2013 results from the company are ‘unlikely to offer further near term upside,’ added Burns, who retained his target price of 213p.
South African ‘uneconomic protectionism’ threat to Anglo American
Government interference in South African mining could have a ‘severe’ impact on Anglo American (AAL.L), the miner which makes over half of its profits in the country, warned analysts at Liberum.
The government of the mineral rich country has approved changes that give the mines minister the power to declare certain minerals ‘strategic’. The government will then be able to enforce the volume and the price that 'strategic' minerals have to be sold domestically.
While the changes are intended to tackle South Africa’s very high rates of unemployment ‘we expect the mining companies to challenge these amendments for being unconstitutional, as they violate international trade agreements,’ said Liberum’s Ben Davis.
‘The impact is unlikely to be immediate but presents a further tailwind risk for investors in South Africa.’
In addition to the threat posed by this ‘uneconomic protectionism’, Anglo also trades at a premium to rival BHP Billiton, Davis noted, maintaining his ‘sell’ recommendation on the stock.
Add to Aga holdings, say Numis
Add to your holdings in Aga Rangemaster (AGA.L), said Numis analyst Andrew Wade, as the kitchen appliance maker provided a confident outlook for the year ahead.
The company, which describes itself as ‘specialist in range cooking and kitchen living’ reported a dip in pre-tax profits for 2013 to £1.1 million, but strong trading in the first two months of the new year. It was positive about the year ahead, expecting to benefit from the improving UK housing market.
‘Reflecting the operational gearing in the business, and given the strong current trading, supportive housing market backdrop, and strong product line-up, we raise our FY14 PBT estimate from £8.5m to £11.0m,’ said Wade.
He added: ‘With a strong stable of brands and forecast momentum, with the stock trading on 14x cal-14 earnings, we remain positive.’
Headlam to benefit from UK housing, but there are better alternatives
Charles Hall at Peel Hunt has identified another winner from the UK’s improving housing market: carpet supplier Headlam (HEAD.L)
Commenting after the company reported a -5% decline in 2013 pretax profits to £26.4 million, ahead of expectations, Hall said: ‘Headlam will benefit from increased housing transactions through this year and a more positive consumer environment’.
Some of that is already baked into the share price, Hall said: ‘The shares have performed well and are already anticipating the improvement in housing transactions.’
He nonetheless increased his target price on the shares from 430p to 450p.
But the shares are a ‘hold’, with better alternatives available: ‘We would see others as having greater leverage to an improving market, with Topps Tiles and Carpetright having gross margins of over 60% compared with Headlam on 30%.’
Michael Page to reward investors’ patience
Momentum is improving for recruitment group Michael Page International (MPI.L) after a frustrating 2013, said Jefferies analyst Kean Marden as he reiterated his ‘buy’ stance on the stock.
Marden’s update came after the recruitment company reported a 3.5% rise in full year pre-tax profits to £67.1 million.
Shares in the company have lagged the market over the past 12 months, rising just 2%.
‘Improving permanent momentum and the benefit from 2013 platform efficiency initiatives should amplify 2014 profit growth,’ said Marden.
In addition, ‘with an increasingly comfortable balance sheet, resurrection of the share buy-back would repay investors’ patience,’ he added.