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The Expert View: Majestic Wine, Ted Baker & Mitie
by Michelle McGagh on Mar 21, 2014 at 05:01
Our daily roundup of the best analyst commentary on shares, also including Savills and Hargreaves Services.
Investec reviews Majestic Wine as slowdown hits retailer
Investec Securities is reviewing its ‘buy’ rating and 620p price target for Majestic Wine after the retailer warned it had been hit by a slowdown in trading since Christmas.
Majestic (MJW.L) shares slumped 95p or nearly 19% to 413.6p yesterday as the company said it expected this year’s profits to be in line with last year.
It added that the cost of a new distribution centre and head office required to support the roll out of new stories would also curb profits growth next year.
Kate Calvert of Investec said: ‘This is a disappointing set-back from what is a well-run, highly cash generative company. Its growth opportunities remain unchanged, driven by the store roll out programme, online and its commercial business. Key risks are changes in the economic and competitive environment.’
Calvert has cut her profit forecasts for this year and next by 6% and 14% respectively.
Ted Baker brand devotion pays off
Cantor analyst Freddie George has reiterated his ‘buy’ for designer retailer Ted Baker (TED.L) as the brand goes from strength to strength.
George placed a target price of £23.50 on the shares as final results to the end of January came in in-line with expectations and the full-year dividend was stronger than expected at 33.7p per share. The shares rose 23p or 1% to £22.28.
‘Over the last three years there has been an unerring focus on the integrity of the brand, on-going improvements to the ranges…strong momentum in womenswear, which now accounts for 54% of sales,’ he said.
‘These positive drivers have…given the company the confidence to relax the company’s ultra-cautious strategy.’
He added the company is in the early stages of an international roll-out which should boost the brand further.
Sell under pressure Mitie, says Liberum
Liberum has reiterated its ‘sell’ recommendation for outsourcing and energy services company Mitie (MTO.L) after a company statement revealed more exceptional costs.
Analyst William Shirley placed a target price of 280p on the shares which fell 6.8p or 2% to 323.8p.
‘The statement points to underlying trading being in-line. However, more exceptionals (another £10-£15m) this time relating to the restructuring of asset management which, had they been treated as underlying would have been a c.10% earnings per share downgrade,’ he said. ‘Some residual risks still remain.’
Shirley expected organic growth to ‘remain subdued’ and margins to ‘remain under pressure’ as Serco’s scandal – which saw it overcharging the government for services – ‘casts a shadow over the whole sector’.
Savills shares do not reflect performance, says Numis
International estate agents Savills (SVS.L) has been upgraded by Numis as its full-year results beat expectatinos.
Analyst Chris Millington moved the stock from ‘add’ to ‘buy’ and placed a target price of 761p. Its shares rose nearly 12p or 1.9% to 628p.
‘On the basis of the outperformance against our estimates, but also our expectations that Savills will make progress in all territories apart from Asia – which is being impacted by the slowing transactional market in Hong Kong which started to decline in Q4 2013 – we are increasing estimates,’ he said. ‘2014 profits before tax increases from £76.8 million to £80 million, earnings per share from 44.3p to 45.6p, and 2015 profits before tax from £83.8 million to £89 million, earnings per share from 48.3p to 50.7p.’
The outperformance, however, is not fully reflected in the share price, said Devlin, hence the higher rating.
Carbon tax freeze good news for Hargreaves Services
The UK’s leading coal producer and distributor Hargreaves Services (HSP.L) received a small boost from Wednesday’s Budget as the chancellor announced a freeze on carbon tax.
Jefferies analyst Justin Jordan reiterated a ‘buy’ recommendation and placed a target price of £10.30 on the shares.
‘[The] Budget delivered a modest positive for the UK coal industry with a freezing of UK carbon tax,’ said Jordan. ‘We view it as a welcome step in recognising the longer-term future of coal within the UK energy mix.’
He added that the company also appointed former SSI UK chief Phil Dryden to group business development director to target further international expansion.
‘While key risks remain for production at its UK surface coal mines and global coal/coke prices, we view the freezing of the UK’s carbon tax as a welcome first step in recognising the longer term presence of coal within the UK energy mix.’
The shares slipped 4.5p of 0.5% yesterday. They have fallen 2% this year.