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The Expert View: Henderson, Tesco and Standard Chartered
by Michelle McGagh on Mar 05, 2014 at 05:01
Our daily roundup of analysts' share recommendations and commentary, also including Ashtead and Moneysupermarket.com.
Henderson’s five year plan doesn’t stop downgrade
Numis has downgraded Henderson (HGGH.L) from ‘hold’ to ‘reduce’ despite the asset manager setting out its five year plan.
David McCann placed a target price of 210p on the shares but was not buoyed by the full year 2013 results where the company outlined a five-year plan. It aims to double assets under management from £64 billion to £128 billion, achieving 15% growth, by the end of 2018.
‘It aims to achieve this through 5% per annum net organic growth and 10% per annum through a combination of performance and acquisition. It is also target a medium term operating margin of 40%, from c36% in full year 2013,’ he said.
‘We regard Henderson as an asset manager with a lower than average quality of income that is implicitly targeting c10% per annum profit growth over the next few years, which is broadly in line with our expectations for larger asset managers. We therefore feel that a small discount to the sector rating would be warranted.’
Tesco downgraded as it loses its grip on UK sales
Cantor analyst Mike Dennis has downgraded Tesco (TSCO.L) from ‘hold’ to ‘sell’ following a reduction in 2015 trading profits.
Dennis also reduced the target price by 15% to 282p from 333p after the supermarket giant published an update note that showed a 8.4% reduction in full year 2015 group trading profits to £3,256 million – 5% below consensus. There was also higher than average net debt prompting fears that 2015 could be the fourth year of weak UK sales and falling margins.
‘We have argued that Tesco was wrong to be aligned to a strategy that protected margins but the solution now is not about trying to correct everything at once,’ said Dennis. ‘Tesco is now faced with the least bad option to refurbish the majority of its hypermarkets and express stores. In our view, this may not work as the competition can now easily match or better Tesco’s pricing.’
He added that Tesco could also move to a medium-low pricing strategy similar to Sainsbury’s.
Are their issues lurking in Standard Chartered?
Shore Capital analyst Gary Greenwood has raised concerns that there could be ‘significant issues lurking beneath the surface’ of Standard Chartered (STAN.L) bank.
He retained a ‘hold’ recommendation on shares in the bank which he said has had a disappointing 2013 with earnings estimates revised downwards and falling revenue that culminated in management stepping back from its ‘previously held double-digit revenue growth target and signalling a greater focus on cost and capital efficiency’.
Greenwood said the news flow has not improved this year with speculation of boardroom unrest and the possibility of a rights issue hanging over the bank.
‘The announcement of a significant boardroom and business restructuring in January 2014, including the surprise resignation of long-serving finance direct Richard Meddings, has left us feeling that there may be more significant issues lurking beneath the surface,’ said Greenwood.
He estimated the company will report a 2% fall in profit before tax to $7.3 billion in its full year 2013 results, from £7.5 billion in 2012.
Ashtead shakes off a bad year and the future’s bright
Equipment rental group Ashtead (AHT.L) seems to have shrugged off a tough past year and is set for strong growth, according to Liberum.
Analyst David Brockton reiterated his ‘buy’ recommendation and increased the target price from 810% to £10.30.
‘Despite a tough comparator in the prior year, Ashtead continues to deliver,’ he said. ‘Q3 revenue growth of 23% continues the momentum achieved in the first half, with earnings per share 15% ahead of our expectation. Full year capex guidance is unchanged and foreign exchange represents a headwind, but we raise full year 2015 earnings per share by 4%.’
He added that US non-residential recovery is ‘materialising’ and the company continues to gain market share.
‘Forecast earnings growth is strong, upgrade momentum seems likely to continue and Republic of Ireland keeps improving.’
Moneysupermarket.com’ results are ‘lukewarm’ but 2014 looks good
Jefferies analyst David Reynolds has retained his ‘buy’ recommendation for comparison site Moneysupermarket.com (MONY.L) despite full year 2013 results failing to give away more detail on what is planned for 2014.
Reynolds placed a target price of 248p on the shares but said ‘the company is still shy of a real guide [for 2014]’ and that it’s statement that ‘group trading in the first two months of the year has been satisfactory’ is not enough for investors.
He added that the company is ‘still suffering through from a hangover from the rather shockingly bad 2013, underperforming the FTSE 250 by 6% [since January]’.
‘[The FY2013 results are] a tad lukewarm in reality, in line with consensus, but lagging our bullish revenue view,’ said Reynolds. ‘Thus no real tacit guidance, an unspoken acknowledgement that the company is happy with consensus perhaps.’
Despite the lukewarm comments from the group Reynolds expects ‘slow, deliberate progress in natural search rankings that should continue and we sense MONEY should be able to resurrect the competitive position in that all-important insurance vertical’.
‘2013 has been a challenging year for MONY, 2014 looking better.’