The Expert View: Marks & Spencer, Aveva and JD Sports

Our daily round-up of analyst recommendations and commentary, featuring Marks & Spencer, Aveva, JD Sports, Dialight and Sinclair IS Pharma.

Key stats
Market capitalisation	£5,897m
No. of shares out	1,608m
No. of shares floating	1,583m
No. of common shareholders	not stated
No. of employees	81208
Trading volume (10 day avg.)	4m
Turnover	£9,934m
Profit before tax	£513m
Earnings per share	32.23p
Cashflow per share	60.28p
Cash per share	28.44p

*Correct as at 10 Jan 2013

‘Disappointing’ M&S remains a ‘sell’

Investec’s Bethany Hocking is standing by her ‘sell’ rating on Marks & Spencer (MKS.L) after the retailer delivered a poorly-received update on its festive trading.

The worse than expected performance showed group sales increased by 0.6% during the 13 weeks to the end of December, with UK like-for-like sales down 1.8% in what chief executive Marc Bolland described as a ‘challenging and highly promotional General Merchandise market’. Food sales on the other hand were strong.

‘We had been (slightly) warming to the stock, but the statement demonstrates the size of the challenge ahead to stem the declines at M&S,’ said Hocking.

Meanwhile, analysts at Espirito Santo cut their rating to ‘sell’ from ‘neutral’. And Panmure Gordon were among analysts cutting their target price for M&S shares, though they noted that ‘Private equity interest may also now be piqued again’.

Shares in the group closed at 368.8p on Thursday, down 2.2p or 0.6%

Key stats
Market capitalisation	£1,453m
No. of shares out	68m
No. of shares floating	67m
No. of common shareholders	not stated
No. of employees	1055
Trading volume (10 day avg.)	0m
Turnover	£196m
Profit before tax	£40m
Earnings per share	58.73p
Cashflow per share	66.97p
Cash per share	72.01p

*Correct as at 10 Jan 2013

Aveva share price strength questioned

Aveva (AVV.L)’s share price strength since interim results in November has been ‘surprising,’ says Merchant Securities analyst Roger Phillips who has downgraded his rating on the engineering IT group’s shares to ‘hold’ from ‘buy’.

‘Second half growth performance needs to improve compared with the first half, meaning there is potential for small downgrades,’ said Phillips, who has also cut his target price by 10% to 1980p.

He suggested Aveva’s recent share price gains might be due to hopes around the company’s new E3D product, but said it was unlikely to have any material impact in the short term.

‘Forthcoming Q3 IMS will be in-line at best, but that there is the possibility of small downgrades.’

Shares in the group closed at £21.35 on Thursday, 6p or 0.3%

Key stats
Market capitalisation	£329m
No. of shares out	49m
No. of shares floating	14m
No. of common shareholders	not stated
No. of employees	10626
Trading volume (10 day avg.)	0m
Turnover	£1,060m
Profit before tax	£47m
Earnings per share	96.27p
Cashflow per share	150.48p
Cash per share	137.74p

*Correct as at 10 Jan 2013

'Buy' battered JD Sports, Seymour Pierce says

Freddie George, analyst at Seymour Pierce, has reiterate his 'buy' recommendation on JD Sports (JD.L) in spite of a disappointing trading update.

'Overall, the trading update for the seven weeks to 5th January is marginally disappointing impacted by poor results from Blacks, its outdoor business,' George said.

Following the update, George's 2013 pre-tax profit moves from £62.5 million to £61 million, taking earnings per share down from 87.9p to 85.8p.

Nonetheless, he believes the shares look oversold. 'The stock is the lowest rated in our universe and has a dividend yield of 4%, which we believe will not be cut because of the strength of the company’s balance sheet,' he said. 'We reiterate our Buy recommendation and our price target of 1000p, which puts the stock on c.11.0x FY13 forecast earnings.'

Shares in the group closed at 674.5p on Thursday, down 0.5p or 0.1%

Key stats
Market capitalisation	£339m
No. of shares out	32m
No. of shares floating	30m
No. of common shareholders	not stated
No. of employees	1139
Trading volume (10 day avg.)	0m
Turnover	£103m
Profit before tax	£10m
Earnings per share	30.80p
Cashflow per share	39.08p
Cash per share	43.08p

*Correct as at 10 Jan 2013

Dialight shines for Canaccord

Investors can expect an ‘uplift’ in Dialight shares, said Canaccord Genuity analysts, after the US LED lighting specialist delivered an in-line trading update.

The company’s shares surged on Thursday after it reported that Lighting segment revenues have grown by over 70% versus the full year of 2011 and by almost 80% in comparison to the second half.

Analysts Jonathan Imlah and Bob Liao maintained their ‘buy’ rating on the shares. ‘Given the recent share price decline, simply meeting revenue expectations and its guidance of 30% drop-through should provide uplift to the shares,’ they noted.

‘Shares have been pressured over the past months. We believe today’s press releases should help provide support.’

Shares in the group closed at £10.60 on Thursday, up 45p or 4.4%

Key stats
Market capitalisation	£111m
No. of shares out	403m
No. of shares floating	389m
No. of common shareholders	not stated
No. of employees	132
Trading volume (10 day avg.)	3m
Turnover	£51m
Profit before tax	£-9m
Earnings per share	-2.21p
Cashflow per share	-0.88p
Cash per share	1.00p

*Correct as at 10 Jan 2013

Sinclair IS still a ‘buy’ say Finncapp

Slightly lower revenues in the first half of the year at Sinclair IS were not enough to deter brokers Finncap, who have maintained their ‘buy’ recommendation on the pharma company’s shares.

Sinclair IS reported that revenues for the first six months to December were 2% lower than the same period last year.

However, Finncap analyst Keith Redpath noted, ‘Sinclair has disposed of products, and faced currency headwinds. On a like-for-like basis, revenues increased +4%.’

He added that ‘a renegotiated debt facility provides further firepower for acquisitions’

Redpath continued: ‘Improved margins and the growth in the dermatology and international businesses mean we leave our earnings forecasts unchanged.’

Shares in the group closed at 27.7p on Thursday, down 0.2p or 0.6%