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The Expert View: ITV, British Land and N Brown
by Michelle McGagh on May 15, 2014 at 05:01
Our daily roundup of the best analyst commentary on shares, also including Hilton Foods and Breedon Aggregates.
Steady ITV still a ‘buy’ for Liberum
A steady first quarter trading statement for ITV (ITV) that is in line with full-year expectations made for an unexciting read but it is still a top media pick for Liberum.
Liberum analyst Ian Whittaker reiterated his ‘buy’ recommendation as a ‘top pick’ and target price of 255p. ITV was the biggest FTSE 100 faller yesterday, shedding 6.2% to 179.1p.
‘Q1 [trading statement] in line with ITV’s guidance at full year,’ he said. ‘Q2 looks fine and we think their TV advertising guidance is on the cautious side. [We] keep full year forecasts, where we are 10% ahead of 2014 consensus.’
ITV predicted a 12% to 13% rise in revenue thanks to the football World Cup and that July should be ‘positive’. ‘We would expect ITV to be vague given some of this will be based on how England does in the World Cup,’ said Whittaker.
‘ITV is in a very good strategic position and should benefit from the UK economic recovery,’ he added.
British Land beats Peel Hunt’s expectations
Real estate investment trust (Reit) British Land (BLND) has beaten forecasts set out by Peel Hunt, which says the group is catching up with its competitors.
Analyst Kate Renn retained a ‘buy’ recommendation and increased the target price from 730p to 770p after the Reit recorded an increase in profit before tax of 8.4% to £297 million and a rise in full year net asset value of 15.4% to 688p. Shares were flat yesterday at 714p.
‘Our preferred major for this year has beaten our estimates, with a total return of around 20% including dividends, skewed to the second half of the year,’ said Renn. ‘Despite inherent disadvantages against rival Land Securities, British Land is making notable progress in narrowing the gap via accelerated asset recycling; particularly credible is the divestment out of some more mature retail properties.’
N Brown to make it big in coming years, says Investec
Specialist fashion retailer N Brown Group (BWNG), which caters for larger sizes and the elderly, may have fallen short of expectations in its full year results but Investec believes it has the potential for double-digit growth.
Analyst Kate Calvert reiterated a ‘buy’ recommendation and a target price of 55p despite 2014 results falling short of expectations. She said the figures were ‘robust given the transition the business is going through’. Shares yesterday fell 0.5% to 465.4p.
‘We believe there is plenty to be positive about,’ she said. ‘We believe N Brown should see a step change in full-year 2016 and has the potential to be a sustainable double-digit growth company with global opportunities.’
She noted the key indicators that would drive business include branching out into the US and better marketing strategies.
Breedon Aggregates downgraded on share price valuation
Building material supplier Breedon Aggregates (BREE) has been downgraded on belief that improving market conditions have already been factored into the share price.
Jefferies analyst Sam Cullen downgraded the shares from ‘buy’ to ‘hold’ but increased the target price from 42p to 45p.
However, he noted that possible acquisitions could force him to re-evaluate his recommendation and price target further.
‘Breedon’s markets are clearly improving but with the shares trading at 15 times the next 12 months’ earnings before interest, taxation, depreciation and amortisation (EBITDA), we think this is already reflected in the price,’ he said. ‘We increase our price target to reflect the improving outlook, but downgrade our rating to “hold” on valuation grounds.
‘Further acquisitive growth could force us to re-evaluate this stance. Our upside scenario assumes acquisitions of £30 million per annum until 2016, and implies a price target of 61p, 30% above the current share price.’ Shares were flat at 47.3p yesterday.
New business at Hilton Food will turn to profit next year
Meat packer and supplier Hilton Food Group (HFG) has been downgraded as analysts highlighted increased spending in 2014 to pay for new ventures and increased supply to Tesco.
Numis analyst Charles Pick downgraded the stock from ‘buy’ to ‘add’ and placed a target price of 610p on the shares, which fell 1% to 524p yesterday.
In its trading statement ahead of its annual general meeting the group’s performance was in line with expectations despite ‘challenging consumer conditions’ in some countries in which it operates.
Pick said there would be further struggles for the company this year thanks to a joint venture in Australia and a new contract to supply more to Tesco.
‘A key variable is that 2014 is likely to see additional start-up costs for the extra Tesco business and expansion by the joint venture in Australia,’ he said. ‘We still expect around £2.1 million of such costs versus £1.8 million last year. It remains the case too that 2015 will be the first year to see the full benefits of the extra Tesco business and 2016 the first to see notable benefits from the new Victoria plant.’