Citywire printed articles sponsored by:
View the rest of this gallery online at http://citywire.co.uk/wealth-manager/gallery/a701450
The Expert View: Howden Joinery, Ashmore and Paypoint
by Harry Brooks on Sep 08, 2013 at 08:01
A roundup of some of the best analyst commentary on shares, also including SThree and DMGT.
Our daily round-up of analyst recommendations and commentary, featuring Howden Joinery, Ashmore, Paypoint, SThree and DMGT.
If you'd like to receive news alerts on any of the stocks mentioned in The Expert View, click on the star icons below to add them to your favourites. To buy shares via JP Morgan, click on the shopping trolley icon.
Howden Joinery's still leading the pack, Peel Hunt says
Kitchen cabinets maker Howden Joinery (HWDN.L) isn't cheap, but its superior margins puts it ahead of its rivals, according to Peel Hunt.
Analyst Clyde Lewis visited the company's manufacturing facility in Runcorn, Cheshire, last week, and his trip emphasised Howden's high-tech credentials.
'The recently installed new cutting and automation machinery is still being bedded down and management believes that, once fully ironed out, the site has the potential to produce up to 6m boxes annually,' he said.
The facility is one of two that Howden operates, the other is located in the firm's namesake town in Yorkshire.
While its premium valuation makes the shares a 'hold' for now, it's one to buy on any weakness, Lewis said.
'Howden has a great niche that looks unassailable for a good number of years. As such, it will benefit from a recovery in UK housing and general economic activity that will push up its volumes and profits.'
Shares in the group closed at 290.8p on Friday, up 2.7p or 1%.
Canaccord downgrades Ashmore
Canaccord has downgraded Ashmore Group (ASHM.L) from 'buy' to 'hold' ahead of tomorrow's full-year results, arguing the problematic economic outlook will continue to act as a drag on profits at the investment management firm.
Analyst Arun Melmane is expecting the results to show £329 million of revenues, £217 million of operating profit and dividends per share of 15.6p.
'We are still of the view that Ashmore will fare better than some of the other emerging market focused players given its assets under management distribution and franchise,' the analyst said. 'Given the slowing volume dynamics, asset margins will remain in focus.'
'We cut Ashmore to a HOLD from Buy but retain our price target of 380p.'
Shares in the group closed at 356.5p on Friday, up 1p or 0.3%.
Paypoint: Liberum like the business, but not the price
Transaction processor PayPoint (PAY.L) is an exciting business with lots of room to grow, but the valuation isn't tempting at the current level, according to Liberum Capital.
Paypoint allows customers to pay various different types of bills including TV licensing, gas and electricity bills, and the London Congestion Charge.
Analyst Joe Brent noted that trends in shopping open new avenues for the firm: 'Internet has grown with e-commerce, particularly retail, and with new customers, like Wonga. The ability to pay by phone holds strong attractions for consumers.'
However, he rates the shares a 'hold' based on their valuation. 'Like the strong balance sheet and long term opportunities. However, the shares are trading above our discounted cash flow model and risk may not be reflected,' he said.
Shares in the group closed at £11 on Friday, up 11p or 1%.
'Hold' SThree, Shore Capital says
Shore Capital has reiterated its 'hold' recommendation on recruitment business SThree (STHR.L) following an encouraging third-quarter update.
Net fee income hit £49.9 million during the third quarter, which represented a 2% decline year-on-year on a constant currency basis, but a 5% improvement on the second quarter.
'What was pleasing was that the contract margin was resilient, demonstrating better controls in place in comparison to H1, in our opinion,' analyst David O’Brien said.
Spending on staff increased over the period, leading O’Brien to trim his pre-tax profit forecast by 7-8%, but he said this reflected a better long-term outlook.
'This investment which is greater than initially anticipated highlights that management believes that improving economics are feeding through to confidence levels and therefore activity levels but there is a short-term cost in terms of the effect of the growth in headcount to overall costs,' he said.
Shares in the group closed at 340p on Friday, down 14p or 4%.
DMGT's fully valued, Westhouse says
Valuing Daily Mail and General Trust (DMGT.L) is all about weighing up its declining print operations against the brighter prospects of its online business-to-business units, according to Westhouse.
Print advertising represented about 42% of 2012 revenues, analyst Roddy Davidson noted, but this is a sector in decline. 'Legacy assets are set to exert a very tangible offset to earnings growth and quality for some time to come,' he said, reiterating his 'neutral' stance on the shares.
'We regard the group’s valuation as full, particularly as its ownership structure precludes the value of its attractive components being unlocked through a bid.
'We therefore retain our Neutral recommendation, but will review this position at the time of 25 September’s trading update.'
Shares in the group closed at 790p on Friday, down 16p or 2%.