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The Expert View: Land Securities, M&S and Greene King
by Daniel Grote on Jun 26, 2014 at 05:01
A roundup of the best analyst commentary on shares, also including Inmarsat and Kazakhmys.
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Land Securities’ Bluewater buy fails to impress Liberum
Land Securities’ (LAND) £696 million deal for a stake in Kent shopping centre Bluewater has not impressed analysts at Liberum, who are worried about the ‘West End pricing’ the real estate investment trust (Reit) has been forced to pay.
‘Land Securities’ acquisition of Bluewater at a 4.1% topped-up yield marks a new low for prime UK shopping centres,’ said Liberum analysts Michael Burt and Jon Stewart.
‘While we do not dispute that Bluewater is an upgrade versus recent retail disposals, we struggle to see the purchase being materially value creative in its own right.
‘Its success will ultimately depend on the ability to deliver above inflationary rental growth in a retail sector where rental growth lags gross domestic product by around 1.5% per year.’
Burt and Stewart maintained their ‘hold’ recommendation and £11.24 target price on the shares, which were trading at £10.27 at yesterday's close.
Weak earnings at M&S worry Barclays
Analysts at Barclays see little evidence of a turnaround in the performance of Marks and Spencer (MKS), as consistent losses of market share in the retailer’s clothing division continue to dog the businesss.
Barclays said M&S’s weak start to its financial year had reinforced its negative view on the stock over the medium term. Analysts Christodoulos Chaviaras and Claire Huff pointed to ‘negative earnings momentum, muted returns on capital expenditure, lack of imminent cash returns and a share price that incorporates some bid speculation we think is unlikely to happen.’
Chaviaras and Huff have reduced their earnings estimates for the business by around 5%, taking a dim view on progress in its clothing and food departments. ‘While M&S is unlikely to be materially impacted by any potential supermarket price war, it will likely not be completely immune either,’ they said.
The analysts have maintained their underweight rating on the stock, and cut its 12-month price target to 340p. Shares in M&S were trading at 426.2p at yesterday’s close.
Jefferies: Inmarsat’s in-flight broadband plans could boost shares
Analysts at Jefferies believe Inmarsat’s (ISA) plans to deliver in-flight broadband services could see the satellite telecommunications company’s shares soar towards £13.
Analysts at the broker raised their target price on Inmarsat from 800p to 920p and reiterated their ‘buy’ recommendation. Shares in the company traded at 725p at yesterday’s close.
‘We had previously argued that Inmarsat’s proposed air-to-ground / satellite network to address the in-flight broadband market in Europe is a scaled, un-replicable, structurally superior proposition in an, effectively, greenfield market with massive potential,’ they said, adding that further work they had done on the stock ‘only serves to increase our conviction’.
‘Looking across Inmarsat’s multiple upside catalysts, we see a reasonable roadmap to a £13+ valuation.’
Share weakness is green light for Greene King top-up
Recent weakness in Greene King’s (GNK) share price has prompted analysts at Numis Securities to upgrade the pub retailer and brewer to an ‘add’ recommendation ahead of results to be announced next week.
Numis analysts Douglas Jack, Wyn Ellis and Ivor Jones forecast Greene King will announce a 7% jump in profits when it announces its final results on 3 July. They upgraded the stock from ‘hold’ and maintained a 975p target price. Shares in the business traded at 831p at yesterday’s close.
Numis made no changes to its 2015 forecasts for Greene King, which are based on strong expansion. ’Forty-five new managed pubs should have opened in 2014, whereas 2015 guidance is for 54 new sites,’ it said, and pointed to growth of the pub retailer’s ‘Hungry Horse’ chain.
‘Management believes that Hungry Horse could expand to over 400 sites, from a current base of around 230. This includes broadening the brand’s exposure in a wider range of locations,’ such as leisure parks, through using smaller and larger sites, and even converting sites that are currently within the tenanted estate.’
Westhouse downgrades Kazakhmys despite tax boost
A jump in the share price of Kazakhmys (KAZ) has prompted analysts at Westhouse Securities to downgrade the copper miner from ‘buy’ to ‘add’ despite a recent tax boost.
The government of Kazakhstan, where Kazakhmys operates, has reduced the mineral extraction tax on assets to be sold to former chairman Vladimir Kim, as it supports the company’s restructuring.
Shares in the company soared in February when Kim said he would buy its inefficient deep mines, which have dragged on its performance, prompting Westhouse analyst Rob Broke to downgrade his recommendation. He has kept a target price of 350p on the shares, which traded at 304.5p at yesterday’s close.
‘While the value of the reduction is relatively small, around $40 million (£24 million), the fact that the government is working to assist in the company’s restructuring is an additional positive,’ he said.