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The Expert View: Hargreaves Lansdown, Catlin and Moneysupermarket
by Harry Brooks on Aug 13, 2013 at 05:01
A roundup of some of the best analyst commentary on shares, also including BSkyB and Laird.
Our daily round-up of analyst recommendations and commentary, featuring Hargreaves Lansdown (founders Peter Hargreaves and Stephen Lansdown pictured above), Catlin, Moneysupermarket.com, BSkyB and Laird.
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Hargreaves Lansdown's set to grow post-RDR, Barclays says
Barclays has reiterated its 'overweight' recommendation on fund supermarket Hargreaves Lansdown (HL.L), arguing the Retail Distribution Review (RDR) represents a huge opportunity to attract large numbers of new clients.
The RDR overhaul of the financial advice industry, which will increase the qualification requirement for advisers, will create as many as 5.5 million 'orphaned' customers, consultancy Deloitte has estimated.
'This should provide a strong structural boost to Hargreaves Lansdown’s customer base which only totals 476,000,' analyst Daniel Garrod said. 'The size of assets under administration (AUA) opportunity from RDR alone could total circa £130 billon.'
This should support the analyst's inflow projections of 22% next year and 16% in 2015, he said.
'As such, we believe its AUA growth should easily outweigh fee pressures; we thus reiterate our overweight rating and 1,145p price target.'
Shares in the group closed at £10.30 on Monday, up 4p or 0.4%.
Catlin upgrade 'poorly timed', Canaccord admits
Canaccord's decision to upgrade insurance business Catlin Group (CGL.L) to 'buy' following its first-quarter results now looks 'poorly timed', the broker has accepted, after the first-quarter results missed expectations.
Friday's trading results showed pre-tax profits down 37% following a decline in investment income. Chief executive Stephen Catlin said low interest rates tool a toll on profits:
'In the current environment, it is impossible for insurers such as Catlin to achieve anywhere near the level of investment return that was once considered normal without assuming undue levels of risk,' he said.
Analyst Ben Cohen has dropped his target price 8.5% to 540p in response to the update. 'We recognise that our upgrade to Buy with the Q1 results was poorly timed, given increasing competition and lowered forecasts, but we see Catlin as more than adequately discounting these challenges after its recent underperformance,' he said, reiterating his 'buy' recommendation.
Shares in the group closed at 497.6p on Monday, up 7.6p or 1.6%.
JP Morgan downgrades Moneysupermarket.com
Slowing growth at price-comparison giant Moneysupermarket.com Group (MONY.L) is putting its growth valuation under pressure, according to JP Morgan, which has downgraded from 'overweight' to 'neutral'.
'Despite long-term potential, after the recent slowdown in revenue growth (13% in Q1, 10% in H1, flat in July), we acknowledge that a return to more than 10% growth may not be straightforward,' analyst Nicolas J Dubourg said.
The analyst said the big unknowns for investors are whether the July slowdown was a one-off; how the firm will respond to recent changes in Google's algorithm, which have pushed its search rankings down; and when the group’s Money segment (about 30% of revenue, down 13% year-on-year in the first half of the year) will recover.
'We downgrade MONY to neutral (from overweight), wait for a clear direction at Q3 results (Nov.) and continue to prefer Rightmove and Gameloft (OW),' Dubourg concluded.
Shares in the group closed at 178p on Monday, down 6.9p or 3.8%.
BSkyB set to keep Champions League rights, Nomura says
Fears of increasing competition for Champions League airing rights are probably overdone, according to Nomura, meaning British Sky Broadcasting (BSY.L) should have the chance to rerate from its present low valuation.
The Champions League auction is likely to take place in October, and the outcome will be critical for BSkyB, which now has a rival in the form of a newly energised BT.
However, analyst Matthew Walker expects a positive outcome for the more established broadcaster. 'The auction process is not a blind auction, and this means BSkyB is only likely to lose the rights if the price reaches extremely unattractive levels,' he said.
He also noted that in the UK, UEFA will probably want to keep the present free-TV package to maximise sponsorship revenues. 'Sponsor opportunities have already been cut off in France (all pay TV) and Germany (on state TV, not commercial TV),' Walker said.
'While not certain, this could mean the free-TV rights stay with ITV and the likelihood of an exclusive pay-TV bid being successful is reduced.'
If BSkyB can retain its rights and demonstrate that BT's broadband initiatives haven't hit revenues then it should rerate from its current valuation, the analyst concluded.
Shares in the group closed at 845p on Monday, down 5p or 0.6%.
Investec downgrades Laird on share rally
Investec has downgraded Laird (LRD.L) from 'reduce' to 'sell' following a surge in the electronics specialist's shares since the start of the month.
The latest results from Laird missed analyst Thomas Rands's expectations, but a subsequent meeting with the management provided reassurance that the elements within their control are on schedule.
'However, the timing and volumes of new products will be dictated by customers (and end user demand),' he added.
'Given the significant 2H13 skew and limited visibility, we see downside risk to FY13E. We trim our FY13E adjusted earnings per share forecast by 4% to 17.0p. Our target price increases to 180p but following the recent rally, we downgrade to Sell.'
Shares in the group closed at 211.9p on Monday, down 2p or 0.9%.