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The Expert View: Morrisons, Barclays and Aviva
by Harry Brooks on Jan 03, 2013 at 05:01
A roundup of some of the best analyst commentary on shares including ITV and Max Petroleum.
Our daily round-up of analyst recommendations and commentary, featuring Morrisons, Barclays, Aviva, ITV and Max Petroleum.
Jeffries cuts target price for Morrisons
James Grzinic, analyst at Jeffries, has cut his target price for Morrisons (MRW.L), believing more shoppers opted to stock up on eggnog and mince pies online and at the discount outlets instead.
Recent share-price movements reflect weakening momentum, Grzinic said. 'We expect hard discounters to have experienced a disproportionate improvement in market share over Christmas, particularly in the North of England,' Grzinic said. 'Secondly, more affluent consumers' migration to online shopping seems to have accelerated over the festive season.'
As a result, he expects like-for-like (LFL) ex-fuel sales to have fallen 2.8% in the six weeks to the end of the year, in spite of the extra day of trading compared with last year. His target price falls from 330p to 310p.
Nonetheless, he retains a 'buy' recommendation on the shares, expecting the LFLs to improve from -1.7% in 12/13 to 0.5% in 13/14.
'Valuation levels remain remarkably depressed,' he added, 'with a 2013 calendarised price to earnings of about 9x (and yield approaching 5%) assuming ongoing downgrades and largely ignoring the structural opportunity for further balance sheet releverage'.
Shares in the group closed at 257.79p on Friday, down 5.2p or 1.9%.
Investec projects 12% return for Barclays investors this year
Ian Gordon, analyst at Investec, has increased his target price for Barclays (BARC.L), retaining his 'buy' recommendation in spite of a whopping 79% rally in the shares over the past five months.
The shares have rerated from 0.4 times estimated 2012 tangible net asset value (TNAV) five months ago to around 0.7 times now, Gordon said, which is in line with RBS but below Lloyds.
'Looking back on the past six months, it has been a formidable journey for Barclays, with an unprecedented, (and in our view unwarranted), level of regulatory and media attack,' he said. 'To its credit, a clear strategic focus has been maintained, operational performance has improved and a material re-rating has been enjoyed over the past five months.'
However, Gordon said the rally has a little further to go: 'trading on just 0.7x 2012e TNAV, with a circa 7% return on equity in 2013e rising to about 10% by 2015e, we expect a circa 12% total shareholder return over the next 12 months, and we retain a Buy recommendation.'
Shares in the group closed at 273.93p on Wednesday, up 11.5p or 4.4%.
Canaccord lifts target price for Aviva
Ben Cohen, analyst at Canaccord, has increased his target price for insurance giant Aviva (AV.L), saying it's making progress selling off underperforming assets and strengthening its capital levels.
On the Friday before Christmas Aviva announced it has sold its US division (excluding the asset management business) to Athene Holding for $1.8 billion (£1.1 billion), and earlier in the week it reached a settlement with Bankia on the termination of their Aseval joint venture in Spain.
These sales increase Aviva’s economic solvency ratio by 21%, from 144% in the third quarter to 165%, Cohen said, with a 4% rise from Bankia and a 17% rise from the US sale.
'Aviva has shown steady progress in restructuring to improve capital efficiency and earnings, shifting its portfolio to improve new business profitability, at the expense of volumes,' he added. 'We forecast the economic surplus to improve further in 2013E to 169%, allowing retained earnings.'
Cohen has a 'hold' recommendation on the shares, and his target price rises 15% to 383p.
Shares in the group closed at 383.36p on Wednesday, up 10.36p or 2.78%.
Westhouse backs ITV's latest acquisition
Roddy Davidson, analyst at Westhouse, has reiterated his 'buy' recommendation on ITV (ITV.L) following its partial acquisition of US-based Gurney Productions.
ITV has taken a 61.5% stake in Gurney, which makes factual entertainment and reality programmes, for an initial sum of $40 million, with an option to buy the remaining 38.5% over the coming years.
'We are encouraged by this acquisition which represents another step towards the group’s goal of building its content base, internationalising its business and reducing the proportion of its revenues derived from advertising,' Davidson said.
'It also adds to the impetus generated last week by news that a dispute between Group M (WPP’s media buying arm) and Channel 4 over airtime costs could provide a short-term boost to its share of advertising spend.'
The analyst's target price rises from 5p to 125p to reflect what he called 'positive momentum' within the group.
Shares in the group closed at 108.48p on Friday, up 3.3p or 3.1%.
Merchant Securities reinstates 'buy' on Max Petroleum
Brendan Long, analyst at Merchant Securities, has upgraded Max Petroleum (MXP.L) to 'buy' after shareholders approved a financial restructuring plan just before the Christmas break.
The analyst said the most noteworthy outcome of the vote was that more bondholders elected to receive shares instead of cash, suggesting they have confidence in the company.
'As a result of the mentioned changes we are reinstating a target price of 6.3p/share from under review (prior to placing our target price under review on 18 December 2012 we had a target price of 6.4p/share),' the analyst said. 'We are also reinstating a BUY recommendation from under review.'
Shares in the group closed at 3.7p on Friday, down 0.15p or 4%.