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The Expert View: Huntsworth, Aveva and Inmarsat
by Michelle McGagh on Jul 15, 2014 at 05:01
Our daily roundup of the best analyst commentary on shares, also including Synthomer and SThree.
Huntsworth ‘under review’ after poor first-half show
Huntsworth (HNTS) has been downgraded after the public relations group issued a profit warning over its revenues for the first half of its financial year.
Peel Hunt analyst Malcolm Morgan placed the ‘small cap’ stock, chaired by Labour peer Paul Myners, ‘under review’ from ‘hold’, doing the same for the target price which was previously at 60p.
Huntsworth said yesterday in a statement to the market that first-half results would be ‘below market expectations’. It added: ‘The board is reviewing the second half-year and, while there is work to do, we believe that the second half will show improvement over the first half-year.’ Shares fell over 15% to 44p in yesterday's trading as a result.
Morgan said the warning ‘does not quantify nor attempt to explain the causes of the short fall’ and ‘nor does it indicate in which divisions the short fall is arising’.
‘In speaking to [chief executive] Peter Chadlington this morning, he notes the scale of the investments made in the first half have and that as yet they have not generated the expected level of revenue,’ he said. ‘The investments are being made in digital capability across the group.’
Synthomer upgraded after latex problems resolved
Chemical maker Synthomer (SYNTS) has been upgraded after it improved sales volumes and quantified an issue over a type of latex.
Numis analyst Charles Pick increased his rating from ‘add’ to ‘buy’ and retained a target price of 300p on the shares, which were trading at 215.1p yesterday.
‘The foreign exchange debit expected this full year has been lifted by £1 million and the first half damage from nitrile latex issues has been quantified but we see no reason to downgrade for 2014,’ he said.
Pick added that it was ‘encouraging’ that ‘destocking’ by glove makers had concluded and ‘European volumes for Synthomer continued to improve in the second quarter’.
He added that trading in Europe was ‘stable’ with ‘demand higher second quarter on second quarter [last year] in northern Europe’.
SThree to deliver increased profits over several years
Specialist recruitment company SThree (STHR) is expected to deliver multiples of current profits over the next few years.
Liberum analyst David Brockton reiterated a ‘buy’ rating and a target price of 475p after first-half profit before tax was up 24% in line with his forecasts despite ‘faster growth in headcount than gross profit through the period’. Shares fell 2.4% to 385.4p in yesterday's trading.
‘Improvement in growth has continued into early third quarter. In the short-term, further work is required in Perm to meet our full-year forecasts,’ he said. ‘Nevertheless, prior investment in newer sectors and regions is now delivering strong growth positioning SThree to deliver multiples of current profit over the next several years.’
He added that SThree remained ‘well placed to deliver significant upside’ and had a ‘high proportionate exposure to recovery potential in the UK’.
US plans to use commercial satellites could boost Inmarsat
Rumours that the US government plans to switch to a commercial satellite provider could be a boost to global satellite network Inmarsat (ISA).
Jefferies analyst Giles Thorne retained a ‘buy’ rating and a target price of 920p following press suggestions by industry magazine SpaceNews that the US government would ditch its proprietary satellites. Shares were trading at 745.9p at yesterday's close.
‘SpaceNews make it clear that this is just one option being considered as part of a wider review process initiated in early 2014 to review US military satellite requirements, with the obvious context being one of perhaps rationalising spend in a tougher budgetary environment,’ said Thorne.
‘We see the rumours reported on by SpaceNews as the potential crystallisation of a material catalyst with our…US government opportunity argument.’
Aveva a ‘buy’ despite currency headwinds
Investec is expecting 2014 profits for engineering software provider Aveva (AVV) to be slightly down on previous forecasts but has maintained a ‘buy’ rating.
Analyst Julian Yates kept a target price of £28 on the shares, which are trading at £20.42, despite the impact of currency pressure on the company.
‘The first quarter interim management statement signalled no change to the demand backdrop since the full year 2014 results, which were well received,’ he said. ‘Foreign exchange (FX) is still a head wind – we tweak full year 2014 profits down 1% for recent FX moves.'
Yates added that profits were expected to be ‘weighted’ to the second half of the year due to ‘a couple of large token deals’.
‘The second-half weighting comment may mute the stock a little, but we stay at “buy” based on the broader growth trends the group is exposed to,’ he said.