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The Expert View: RBS, Standard Chartered and Whitbread
by Harry Brooks on Mar 01, 2013 at 05:01
A roundup of some of the best analyst commentary on shares, also including St. James's Place and National Express.
Our daily round-up of analyst recommendations and commentary, featuring RBS, Standard Chartered, Whitbread, St. James's Place and National Express.
RBS 'heading in the right direction'
Royal Bank of Scotland (RBS.L) is 'heading in the right direction', according to Canaccord analyst Gareth Hunt, even though it reported pre-tax losses of £5.2 billion yesterday, up from £1.8 billion in 2011.
Chief Stephen Hester said the bank was ‘still cleaning up the big mess from the past’, but that progress was being made and the bank would soon be ready to return to private ownership.
Libor manipulation on top of the mis-selling of payment protection insurance (PPI) and interest rate hedges for small businesses cost the bank £1.1 billion, and another fine for money laundering is still hanging over the bank.
In spite of all this, the underlying numbers were still better than Hunt had expected. 'The beat versus our expectations was of a high quality. UK corporate was stronger on all lines with net interest income, costs and loan impairment charges all coming in slightly higher than we forecast,' he said.
However, he warned investors not to expect the resumption of ordinary dividends 'anytime soon'. 'The soon-to-be released Bank of England paper on UK bank capital requirements will hopefully shed more light on this matter and we will review our stance then', he added.
Shares in the group closed at 328.2p on Thursday, down 18.6p or 5.4%.
Citi says 'buy' Standard Chartered
Standard Chartered (STAN.L) looks set to gain from the appreciation of the US dollar against the pound, according to Citi Research analyst Ronit Ghose, who has reiterated his 'buy' recommendation ahead of its annual results on Tuesday.
Ghose is predicting year-on-year revenue growth of 8%, broadly in line with company expectations, and underlying pre-tax profit growth of 10%, excluding fines resulting from the ongoing accusations of covert transactions with Iran.
Foreign exchange trends bode well for the bank, the analyst said. 'We are raising our target price to £20 from £19.2 previously, reflecting appreciation of USD vs GBP (+6.6% year-to-date of which about five percentage points is in February alone), and increased sum of the parts valuation derived from local Asian and emerging markets peers.'
Shares in the group closed at £17.97 on Thursday, up 22.3p or 1.3%.
Whitbread sell-off overdone, Nomura says
The recent dip in Whitbread (WTB.L) shares presents investors with a good opportunity to tap its international growth potential, according to Nomura analyst Tim Barrett.
The shares took a hit on Tuesday after the hotel and restaurant operator said it expected to open 4,000 Premier Inn rooms over the course of the year compared with its previous guidance of 5,000.
Barrett said the market overreacted to the news. 'The pipeline of 8,000 rooms suggests that there is no shortage of attractive sites, only a small change to the phasing of growth,' he said, reiterating his 'buy' recommendation on the shares.
'We expect it to extend the period of rapid expansion to 2018 with a possible target of 70,000–75,000 rooms implying a compound annual growth rate of 6.5%. Even at this pace of growth WTB would have a 2018 market share of only 8.6% and the budget segment would be about 21%.'
Shares in the group closed at £25.34 on Thursday, up 70p or 2.8%.
JP Morgan sold on St. James's Place
JP Morgan analyst Ashik Musaddi has increased his target price for financial advice business St. James’s Place (STJ.L) on the back of an encouraging set of annual results.
Cash earnings of £91.7 million were significantly ahead of Musaddi's £84.2 million prediction, and a dividend per share (DPS) for the year of 10.64p beat his 10.60p estimate.
'Key to note here is that management has guided for a ''similar significant increase'' in the dividend for 2013. This to us implies a DPS of 14.15p in 2013e reflecting a yield of 2.9%,' he said.
'On the back of strong results and higher year-to-date equity markets, we raise our cash profit forecast by 2%/6% for 2013e/2014e and consequently raise our December 2013 target price to 531p versus 496p earlier.' Musaddi has an 'overweight' recommendation on the shares.
Shares in the group closed at 486p on Thursday, up 1.8p or 0.4%.
Bank of America backs National Express
Bank of America Merrill Lynch analyst Mark Manduca has reiterated his 'buy' recommendation on National Express (NEX.L) on the back on an upbeat full-year trading update.
Pre-tax earnings for the year came in at £211.9 million, beating Manduca's £207.9 million estimate, and adjusted earnings per share were 25.4p, again ahead of the analyst's prediction of 23.9p.
'The beat stemmed largely from higher than expected US profitability and lower than expected interest expense,' the analyst said.
He has a price-to-earnings valuation of 11.6x for the company, a premium to the sector average of 10.7x, which he said is justified by its limited exposure to budget cuts in UK bus services and potential to benefit from deregulation in the Spanish bus market.
Shares in the group closed at 218.5p on Thursday, up 23p or 12%.