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The Expert View: Provident Financial, Unilever and Elementis
by Harry Brooks on Oct 22, 2013 at 00:01
A roundup of analysts' commentary on shares, also including Senior and SuperGroup.
Our daily round-up of analyst recommendations and commentary, featuring Provident Financial, Unilever, Elementis, Senior and SuperGroup.
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Shore Capital upgrades Provident Financial
Shore Capital has upgraded personal credit firm Provident Financial (PFG.L) from 'hold' to 'buy' following a decline in the shares.
Analyst Gary Greenwood cited four key pillars of his decision to upgrade:
- The expansion of its Vanquis credit card business into Poland, which Greenwood estimates to be a market of similar size to the UK
- The launch of a new direct repayment loan in the home market
- Strong growth in Vanquis, which Greenwood believes could double in size again over the next five years
- The opportunity for 'material cost savings' in the company's Consumer Credit Division as a result of the transition to mobile phone-based systems rather than the present paper-based approach
Shares in the group closed at £16.25 on Monday, up 49.3p or 3.1%.
Testing times ahead for Unilever
Although the key numbers have been released already, Unilever (ULVR.L) can expect some tough questions when it releases its quarterly results on Thursday.
The consumer goods giant issued a sales warning at the end of last month, telling investors that organic growth would come in at around 3-3.5% for the third quarter, down from 4.9% at the H1 mark.
Investec analyst Martin Deboo, who has a 'buy' recommendation on the shares, warned the shares will remain under pressure for some time to come: 'Expect tough questions on the causes of the Q3 slowdown, not least as to whether it reflects any resurgence from P&G,' he said.
'For our part, we are inclined to share ULVR’s analysis and see a silver lining in the form of a spur to more radical portfolio surgery. But with Q4 guidance a potential hostage to fortune, it feels like the shares are set to retain a question mark into the New Year.'
Shares in the group closed at £24.61 on Monday, down 5.1p or 0.2%.
Elementis still a 'buy', Berenberg Bank says
Despite a difficult start to the year the 'buy' case for chemicals company Elementis (ELM.L) remains clear, according to Berenberg Bank.
The company has underperformed the Dow Jones Chemicals index by 3% in the year so far, analyst Jaideep Pandya said, and the consensus estimate for earnings per share has dropped 8%.
'Moreover, there are market concerns regarding its structural sales growth (high coatings/chromium exposure) and the sustainability of its cash generation (potential for ramp-up in capex,' Pandya said.
'After performing a bottom-up analysis of its portfolio, we do not share these concerns and remain convinced that Elementis can deliver an 11% earnings per share compound annual growth rate and $394 million of free cash flow in 2013-16. We reiterate our Buy rating.'
His target price, however falls from £2.90 to £2.85.
Shares in the group closed at 246.4p on Monday, down 0.9p or 0.4%.
Senior update: 'typically solid'
Jefferies has reiterated its 'buy' recommendation on engineering group Senior (SNR.L) following what it called a 'typically solid' trading update.
Yesterday's third-quarter update highlighted that the group's adjusted pre-tax profits were 'in-line with the Board's expectations'. Analyst Andy Douglas noted that this was despite a gradually worsening foreign exchange dynamic for the firm's operations.
Although Douglas said the currency moves would weigh on the 2014 outturn, he remains positive on the shares with a 'buy' recommendation.
'Senior continues to be an impressively managed, consistent business that is set to benefit strongly from the Large Commercial cycle over a number of years. There are also 'other' end market exposures that we continue to like,' he said.
Shares in the group closed at 280.5p on Monday, up 4.7p or 1.7%.
Canaccord eyes 'buy' window for SuperGroup
Now's a good time to buy into resurgent fashion retailer SuperGroup (SGP.L) ahead of next month's trading update, according to Canaccord.
Over the past year the shares have made strong gains following a period in the doldrums in mid-2012 when the firm blamed ‘arithmetic errors’ for weaker-than-expected sales.
The last month, however, has seen the shares lag the FTSE 350 Retailers index, and Canaccord's Wayne Brown said this has created an opening: 'Shares have been weak the past month under performing the FTSE 350 Retailers by circa 10%. We feel this is overdone and offers a strong buying opportunity ahead of the group’s Q2 trading update due on 7th November.
'We expect the next trading update to be positive and highlight a continuation from the Q1 with wholesale order book growth of +26% and LFL sales +8.5%,' Brown added, reiterating his 'buy' recommendation.
Shares in the group closed at £11.02 on Monday, up 33p or 3.1%.