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The Expert View: Hargreaves Lansdown, Vodafone and Ophir Energy
by Harry Brooks on Sep 05, 2013 at 05:01
A roundup of some of the best analyst commentary on shares, also including Petrofac and Prezzo.
Our daily round-up of analyst recommendations and commentary, featuring Hargreaves Lansdown (co-founder Peter Hargreaves pictured), Vodafone, Ophir Energy, Petrofac and Prezzo.
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Canaccord lifts target price for Hargreaves Lansdown on record-breaking results
Canaccord has pushed up its target price for fund supermarket Hargreaves Lansdown (HL.L) on the back of a record set of results.
The firm announced a 28% rise in profits to £195.2 million in the year to 30 June, with assets under administration leaping 38% to £36.4 billion. Hargreaves said the first phase of the retail distribution review (RDR1), which abolished the payment of commissions to financial advisers, contributed to the bumper results, as 'orphaned' investors switched to its platform.
'We think we’ve gained an awful lot of orphan clients from advisers who have given up after RDR1,’ said co-founder Peter Hargreaves.
Analyst Robin Savage increased his target price 22.4% on the back of the update to £10.40, but he retains a 'hold' recommendation based on uncertainty over revenue margins in 2014 and 2015.
Shares in the group closed at £10.14 on Wednesday, down 17p or 1.7%.
Where next for Vodafone?
Vodafone (VOD.L)'s Verizon Wireless sell-off will reveal the true strength of the non-US operation, according to Bank of America Merrill Lynch, which has reiterated its 'buy' recommendation on the shares.
In the third-largest corporate deal ever Vodafone has agreed to sell its 45% stake in Verizon Wireless to Verizon Communications for $130 billion, with $84 billion set to be returned to investors. The news led to an initial surge in the shares, followed by a dip back down as investors took profits on the announcement.
Analyst Emmet Kelly said the price agreed was 'very attractive', and more corporate action could follow.
'US sale highlights non-US value (110p+/share of value, BoA estimate),' he said. 'With low leverage and strong equity free cash flow, Vodafone could become a bid target.
'Vodafone will see improving top-line dynamics, driven by £6 billion of new investments, Best Network, lower mobile termination rate impact, cyclical recovery (UK, S Europe), smart-phone penetration, 4G etc. Vodafone's dividend per share yield (circa 5.5%) - post the US sale - will be attractive.'
Shares in the group closed at 207p on Wednesday, up 4.5p or 2.2%.
Liberum downgrades Ophir Energy
Liberum Capital has downgraded Ophir Energy (OPHR.L) from 'hold' to 'sell', arguing that despite the precipitous decline in the shares they're still trading at a 144% premium to core net asset value.
'Disappointing changes to the drilling programme overshadowed the (few) positives in Ophir’s interim announcement,' analyst Kate Sloan said. The analyst said gas discoveries offshore Tanzania may have limited value, meaning plans to build three liquefied natural gas trains look questionable.
As for drilling plans in Gabon, Sloan believes the market is ascribing a lot of value to what are high-risk prospects.
'Any investment decision on Ophir demands a view on the exploration portfolio. We believe that it is not as attractive as the current share price implies, despite last week’s re-rating,' she added.
Shares in the group closed at 323.7p on Wednesday, up 2.7p or 0.8%.
Berenberg Bank questions Petrofac's margin sustainability
Berenberg Bank remains cautious on Petrofac (PFC.L) despite last week's encouraging first-half update, which saw the shares take on 9%.
The update was ahead of consensus estimates but in line with company guidance. Speaking to Berenberg Bank after the results, Petrofac said bidding opportunities in Turkmenistan and Kazakhstan, ahead-of-schedule progress on the South Yoloten project in Turkmenistan, and strong revenue visibility for 2014 are all restoring investors' confidence.
However, analyst Asad Farid is sticking with a 'hold' recommendation on the shares: 'We retain our cautious view on margin sustainability for the Onshore Engineering & Construction division due to deteriorating contract mix,' he said.
'Kazakhstan has a transparent oil & gas project market with a rigorous bidding process; hence contractors (including the likes of Saipem) fight hard to win projects and margins on contracts tend to be lower.'
Shares in the group closed at £14.18 on Wednesday, up 22p or 1.6%.
Peel Hunt eyes more upside for Prezzo
Italian restaurant operator Prezzo (PRZ.L) has room to grow ahead of the competition, according to Peel Hunt, which has a 'buy' recommendation on the shares.
Analyst Nick Batram has put his 120p target price under review following a strong first-half trading update that showed revenues up 17% year-on-year to £79.7 million and a 12% rise in profits to £8.5 million.
'In common with comments from Restaurant Group last week, the pipeline is building, and it looks as though Prezzo is going to open about 30 sites in the current year – ahead of our expectations of 25,' Batram said.
'The shares have enjoyed a good run but, given the expanding pipeline and improving consumer backdrop, there could be room for further outperformance – driven by upgrades.'
Shares in the group closed at 128.3p on Wednesday, up 4.4p or 3.5%.