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The Expert View: Ophir Energy, Carpetright and Senior
by Harry Brooks on Oct 17, 2012 at 05:01
Our daily round-up of analyst recommendations and commentary, featuring Spirit Pub Co and Bodycote.
Our daily round-up of analyst recommendations and commentary, featuring Ophir Energy, Carpetright, Senior, Spirit Pub Co and Bodycote.
Deutsche Bank downgrades Ophir Energy, urges investors to take profits
Phil Corbett, analyst at Deutsche Bank, has downgraded oil and gas explorer Ophir Energy (OPHR.L) from 'hold' to 'sell', saying now's a good time for investors to take profits.
The shares have gained more than 90% in the year to date on the back of a 100% exploration success rate offshore Tanzania.
However, Corbett warned that the upcoming capital markets day (CMD) on 23 October day doesn't look likely to raise the shares any higher. 'The market is already discounting high-impact wells on the Block 1 Basin Floor Fan play and pre-salt Gabon in 2013,' he warned.
'With fully processed results from the 2012 3D seismic over both areas unlikely to be complete in time for the CMD, the characteristics... of individual leads and prospects may not be forthcoming.'
He added that the Jodari appraisal campaign could yet see the shares rise again, but he said it would have to deliver 'success significantly ahead of expectations to materially impact valuations'.
Shares in the group closed at 579.5p on Tuesday, down 20p or 3.34%.
Seymour Pierce reiterates 'sell' on Carpetright
Freddie George, analyst at Seymour Pierce, has reiterated his 'sell' recommendation on floor coverings retailer Carpetright (CPR.L), saying the latest results show just how far the group has to go to reclaim the profits it was able to command almost a decade ago.
In the 12 weeks ended 13 October like-for-like sales rose 0.6%, but total sales fell by the same amount as a result of store closures. Sales will have been adversely affected by August's sporting distractions, George said, but the refurbishment programme went some way to offset this.
Although the analyst said sales are now going in the right direction, he said there remains a long road ahead. 'Earnings should start to recover but not in our view back to the record operating profit levels of over £60 million seen in 2004. It will, we believe, be a long time before housing activity, the main driver of results, gets back to the highs of the last decade.'
He added that at present the shares are ambitiously valued at more than 60x forecast 2013 earnings.
Shares in the group closed at 695.01p on Tuesday, down 4.49p or 0.64%.
Shore Capital downgrades Senior to 'sell'
David O’Brien, analyst at Shore Capital, has downgraded engineering holding company Senior (SNR.L) to 'hold' from 'buy' amid news it has sold Manchester-based Senior Hargreaves.
German engineering group M+W paid an undisclosed sum for Senior Hargreaves, a heating and ventilation ducting supplier to the nuclear and construction industries. Senior said the firm no longer fitted its strategic direction as it was the only one of its businesses operating in these markets.
O’Brien noted that Senior has made a one-off contribution into the pension fund of £6 million, which he said was probably not far away from how much it got for Hargreaves.
The analyst cited tough trading conditions in support of his decision to downgrade. 'We reduce our recommendation on the group to a HOLD recommendation (previously BUY), in reflection of the toughening economic environment, as seen last week in the update delivered from a major US engine manufacturer.'
Shares in the group closed at 195.51p on Tuesday, up 5.71p or 3.01%.
Oriel sticks with 'buy' on Spirit Pub Co
Jeffrey Harwood, analyst at Oriel, has reiterated his 'buy' recommendation on Spirit Pub Company (SPRT.L) following a strong set of full-year results.
Pre-tax profits are up 16% over the year to £51 million, slightly missing Harwood's £52 million estimate, on earnings up 5% to £146 million. A dividend of 1.95p will be paid for the year. The analyst said he expects to reduce his profit forecast for the current year by £1 million based on the results.
Harwood was positive on the results despite the slight miss on profits: 'The shares have enjoyed a strong run ahead of the results and have been very good performers this year.
'On a medium term view the shares continue to look attractive on a prospective price-to-earnings ratio of under 10 times and a yield of 3.7%, based on our forecasts for 2012/13.'
Shares in the group closed at 60p on Tuesday.
FinnCap welcomes 'sensible' US acquisition at Bodycote
David Buxton, analyst at FinnCap, has welcomed news that thermal processing firm Bodycote (BOY.L) has acquired a US business to expand its footprint in the region.
Bodycote paid Bluewater Thermal Solutions £42.2 million for Carolina Commercial Heat Treating, funding the acquisition with cash reserves and bank facilities.
Stephen Harris, Bodycote's chief executive, said the acquired company has few local competitors, and that the Carolina region is one of the biggest recipients of inward investment in the country, with many domestic and overseas corporations establishing facilities there.
Buxton said the acquistion appears 'sensible' and would be earnings accretive. 'We have upgraded our 2013 forecasts by 6% to take into account the acquisition, which places the price-to-earnings ratio at 8.4x, which is a little lower than webelieve fair at this point,' he said.
However, he added that weaker industrial markets will continue to have a negative effect on sentiment. 'We therefore see some upside to today’s news, but retain a hold on a one-year view.'
Shares in the group closed at 359.79p on Tuesday, up 14.69p or 4.26%.