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The Expert View: Lloyds, Bovis Homes and ITV
by Harry Brooks on Oct 30, 2013 at 05:01
A roundup of analysts' commentary on shares, also including Regus and Next Fifteen Communications.
Our daily round-up of analyst recommendations and commentary, featuring Lloyds, Bovis Homes, ITV, Regus and Next Fifteen Communications.
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Numis downgrades mis-selling battered Lloyds
Lloyds (LLOY.L) shares are no longer cheap enough to demand attention, according to Numis, which has downgraded the shares from 'add' to hold'.
Yesterday's third-quarter update showed a £440 million loss on the back of continued PPI mis-selling costs. The shares headed south on the news, despite assurances from Lloyds' bosses that it's now in discussions with the regulator over restarting dividend payments.
With the shares up almost 100% over the past year the current price is now close to Numis's target. 'Shares are now 6% below our 85p share price target and trade at 1.57x Q3 tangible net asset value (51.1p). We reduce to HOLD(from ADD) retaining 85p target price,' the analysts said.
Shares in the group closed at 78p on Tuesday, down 1.5p or 1.9%.
Liberum Capital tips homebuilders to impress
Liberum Capital has upgraded Bovis Homes (BDEV.L) and Redrow (RDW.L) from 'hold' to 'buy' having turned more positive on the UK homebuilding sector.
'We are more positive because we anticipate strong trading updates through November’s mini-reporting season,' analyst Charlie Campbell said.
'But we also see house price inflation continuing without getting out of hand, and rate rise fears abating. The combination of subdued land prices and government support also make this cycle better than the last. These positive factors should allow the sector’s re-rating to continue.'
Campbell said other good plays in the sector include Barratt and Taylor Wimpey, both of which have helpful exposure to the South East's booming market.
Shares in the Bovis closed at 790p on Tuesday, up 30.5p or 4%.
Berenberg Bank downgrades ITV to 'sell'
Berenberg Bank has downgraded ITV (ITV.L) from 'hold' to 'sell', arguing its relatively weak presence in online broadcasting will cause it problems longer term.
'Our view on ITV is shaped by the conflict between its near and medium/long-term performance,' analyst Sarah Simon said. 'While Q3 has seen better than expected advertising growth, in the medium to long term we believe that ITV has poor online positioning and that this could be a driver of downgrades.'
The analyst said the growth of online video is already beginning to undermine TV budgets in the US, and the UK will doubtless follow the same path. Although ITV has reshuffled its management a few times recently in a drive to boost the digital side of the business, Simon said its growth in online lags both the BBC and Channel 4.
Shares in the group closed at 191.4p on Tuesday, down 0.5p or 0.3%.
Investec downgrades Regus on share price rise
Investec has downgraded office outsourcing specialist Regus (RGU.L) from 'buy' to 'add' following a strong period for the shares.
Yesterday's third-quarter update showed group revenues up 25.5% on a constant currency basis, and Investec's Andrew Gibb said overall the figures were impressive given strengthening comparatives.
Plans to open some 420-440 new units, up from the previous forecast of 350, will take a toll on the balance sheet, but it clearly shows management's confidence in the growth prospects, Gibb said.
Nonetheless, he believes now's the time to temper his recommendation: 'The shares have been on a strong run of late, up some 12% relative in the past month, as confidence behind the growth opportunity builds.'
Shares in the group closed at 205.8p on Tuesday, up 1p or 0.5%.
Canaccord downgrades Next Fifteen Communications on profits warning
Canaccord has downgraded PR firm Next Fifteen Communications (NFC.L) from 'buy to 'hold' following a profits warning.
NFC warned that profits from its Bite agency are going to fall short of expectations as a result of 'audit issues'.
Canaccord's Simon Davies said the group has struggled since its merger with Bourne in 2012, and the accounting issues have occurred in both the UK and German parts of the business.
'This all points to a lack of process within the accounting function. And NFC has announced that Finance Director David Dewhirst has decided to step down with immediate effect. An interim FD will be appointed, while the group looks for a permanent replacement,' the analyst said.
Shares in the group closed at 70p on Tuesday, down 23p or 25%.