The Expert View: Kingfisher, Centamin and William Hill

Our daily round up of analyst recommendations and commentary, featuring Centamin, Kingfisher, William Hill and Aberdeen Asset Management.

Key stats
Market capitalisation	£663m
No. of shares out	1,101m
No. of shares floating	1,025m
No. of common shareholders	not stated
No. of employees	1111
Trading volume (10 day avg.)	3m
Turnover	212m USD
Profit before tax	114m USD
Earnings per share	0.10 USD
Cashflow per share	0.13 USD
Cash per share	0.09 USD

*Correct as at 26 Nov 2012

Unrest in Egypt drags on Centamin shares

Protests in Egypt could put pressure on miner, Centamin, warned analysts at Nomura. Shares fell 4.1p, or 6.3%, to 60p in Monday trade as renewed protests also hit the Egyptian stock market.

Tyler Broda, analyst at Nomura International, said: ‘The protests have come following President Mohammed Mursi's declaration last week that he will be taking further powers until a constitution is agreed, mainly removing the power of the judiciary in certain sovereign related circumstances and placing his decisions above the court.’

Mursi’s control of the judiciary could impact on the company’s appeal against a court ruling which invalidated its contract last month.

Broda adds: ‘In the context of Centamin, the divide between the presidency and the courts will not likely help sentiment towards the upcoming appeal of the negative court decision from last month.’

Nomura have a 145p target price on the stock with a ‘buy’ rating.

Key stats
Market capitalisation	£2,381m
No. of shares out	706m
No. of shares floating	702m
No. of common shareholders	not stated
No. of employees	16900
Trading volume (10 day avg.)	2m
Turnover	£1,137m
Profit before tax	£115m
Earnings per share	16.28p
Cashflow per share	26.56p
Cash per share	16.28p

*Correct as at 26 Nov 2012

Online growth potential for William Hill

The fast-growing online betting and gaming market is catching the attention of analysts at Killik & Co. The UK’s largest high street bookmaker, William Hill, has an estimated 15% share of the online market but analysts believe the group could be in pole position to grow its market share.

Jonathan Jackson, head of equities, at Killik & Co, said: ‘Over the past two years, whilst retail revenues have been more or less flat, online has been taking market share, with net revenue growth of 20% per annum compared to industry growth of 10%. As a result, 31% of the group’s trailing 12-month net revenues now come from online, which puts William Hill some way ahead of its retail-focused peer Ladbrokes (16%) in that regard, but still quite a bit behind online leader Paddy Power (65%).’

However the group could be in line to acquire Sportingbet and a 29% stake in William Hill Online, owned by its JV partner Playtech.

Jackson adds: ‘If these deals go ahead, not only would they be materially accretive to earnings, but they would also substantially increase the proportion of revenues the group derives from its online business, making it much more comparable to Paddy Power than to Ladbrokes, and thereby, we believe, driving a significant re-rating of the shares.’

Killik & Co has a target price of 339p on shares and the stock fell 2.8p, or 0.8%, to 336p in Monday trade.

Key stats
Market capitalisation	£3,876m
No. of shares out	1,151m
No. of shares floating	911m
No. of common shareholders	not stated
No. of employees	1851
Trading volume (10 day avg.)	3m
Turnover	£784m
Profit before tax	£169m
Earnings per share	14.06p
Cashflow per share	20.80p
Cash per share	122.39p

*Correct as at 26 Nov 2012

Aberdeen Asset Management sit on cash pile

Aberdeen Asset Management reported strong full-year pre-tax profits and revenues, beating expectations, as its assets under management increased 10% to £187.2 billion in 2012.

David McCann, analyst at Numis, commented: ‘Earnings-per-share at 22.6p is 4%-6% ahead of consensus, driven by better than expected performance fees.

‘It is slightly disappointing that there is no new guidance on return of capital other than 'the board remains committed to a progressive dividend policy.' The group now sits on a £266 million net cash balance as of September 2012 and we estimate £350 million currently (post-convertible), comfortably ahead of the £200-250 million regulatory requirement.’

McCann retained an ‘add’ rating on the stock, with a target price of 343p. Shares gave up 6.7p, or 2%, to 336p in Monday trade.

Key stats
Market capitalisation	£6,574m
No. of shares out	2,370m
No. of shares floating	2,316m
No. of common shareholders	not stated
No. of employees	67386
Trading volume (10 day avg.)	7m
Turnover	£10,831m
Profit before tax	£640m
Earnings per share	26.95p
Cashflow per share	37.90p
Cash per share	24.78p

*Correct as at 26 Nov 2012

Concern over structural problems at Kingfisher

Home improvement retailer Kingfisher is expected to report a further reduction in consensus earnings in its interim statement on November 29.

Freddie George, analyst at Seymour Pierce, commented: ‘We are forecasting operating profits down by 7% to £255 million from £273 million. UK is expected to report broadly flat operating profits, £55 million versus £56 million on like-for-like sales down by 1% and gross margins +0.5% points helped by a good Screwfix performance against relatively difficult comparatives with the previous year, which benefited from capacity coming out of the market.

‘Overall, we continue to be concerned that the decline in full year 2013 earnings is not just down to the one-offs of the extreme summer wet weather and the decline in the euro but is also structural. The company has too much space for a multi-channel society while its stores are too large, difficult to shop and not aligned to the new trend for convenience.

George reiterated a ‘sell’ rating on the stock with a target price of 240p. Kingfisher shares shed 4.5p, or 1.6%, to 276p in Monday trade.