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The Expert View: Schroders, Aviva, GlaxoSmithKline
by Harry Brooks on Aug 15, 2013 at 05:01
A roundup of some of the best analyst commentary on shares, also including Henderson and Sports Direct.
Our daily round-up of analyst recommendations and commentary, featuring Schroders, Aviva, GlaxoSmithKline, Henderson and Sports Direct.
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Schroders worth the premium rating, Morgan Stanley says
Morgan Stanley has increased its target price for asset manager Schroders (SDR.L), saying its product range and global distribution justifies its premium to the sector as a whole.
Analyst Bruce Hamilton's target price rises from £26.50 from £25.25, and he reiterated his 'overweight' recommendation.
Rising demand for multi-asset funds leaves the group well-positioned, he said: 'We view this as a source of relative strength, given scale (about 20% of group assets under management), and expect demand supported by dual client wish for volatility protection, combined with attractive return/income credentials.
'At 13.5x 14e (ex-surplus) valuation is a modest premium to the sector, though with plausible upside risks to our above-consensus estimates, risk-reward remains attractive.'
Shares in the group closed at £24.50 on Wednesday, up 24p or 1%.
Canaccord upgrades Aviva to 'buy'
Canaccord has upgraded insurer Aviva (AV.L) from 'hold' to 'buy' on the back of last week's positive trading update, which showed a 5% rise in operating profits in the first half of the year.
'We are raising our target price from 385p to 460p and recommendation to BUY from Hold after good H1 results, which highlighted in particular progress being made on improving divisional performance and reduction in interest costs,' analyst Ben Cohen said.
Aviva currently looks on track to beat previous capital-generation guidance given in the full-year results, he said. The analyst is predicting a 4.7% dividend yield for 2014.
'We may be wrong on the timing of the increase in the dividend, but, absent a deterioration in operating performance, we think investors will continue to give management the benefit of the doubt, in expectation of raised payouts,' he said.
Shares in the group closed at 404.9p on Wednesday, up 6.2p or 1.6%.
JP Morgan upgrades GlaxoSmithKline
JP Morgan has upgraded pharmaceutical giant GlaxoSmithKline (GSK.L) from 'underweight' to 'neutral', saying upcoming catalysts now balance out optimistic earnings expectations.
Expectations for core earnings per share growth this year 'could prove slightly too ambitious,' analyst James Gordon noted, but the coming six months could well herald positive news flow on a number of important drugs.
First off, JP Morgan's proprietary physician survey suggests there's good uptake of GSK's Breo drug for chronic obstructive pulmonary disease (COPD), despite limited clinical differentiation, which should offer some protection against the long-term threat of US generic Advair.
September should also see FDA approval of its Anoro COPD drug, Gordon added.
Shares in the group closed at £16.81 on Wednesday, up 1.5p or 0.1%.
Berenberg Bank upgrades Henderson Group
Last week's trading update has persuaded Berenberg Bank to upgrade asset manager Henderson Group (HGGH.L) from 'sell' to 'hold'.
'Despite pre-announcing its profits (adjusted pre-tax profits of £101.1 million), Henderson was still able to impress at its results last week as flows look to be turning the corner,' analyst Pras Jeyanandhan said.
The analyst's cautious stance on the asset manager centred on its weak flows performance over recent years combined with a balance sheet that was more geared than many of its rivals, he said.
'However, with flows looking set to turn positive in H2 and the balance sheet and capital position soon to be strengthened by the proceeds from the TIAA deal, we upgrade Henderson to Hold and raise our price target to £1.65 [was £1.40].
'As sentiment towards European equities improves, flows look to be picking up pace at the right time.'
Shares in the group closed at 178.9p on Wednesday, up 5.8p or 3.4%.
Opportunity knocks for Sports Direct, Cantor Fitzgerald says
Sports retailer Sports Direct International (SPD.L) is well positioned to grow from rising online demand, according to Cantor Fitzgerald, which has bumped its target price up from 480p to 680p.
The firm's track record over the past five years is highly impressive, analyst Kate Calvert said, with earnings rising more than 30% since the management introduced its 'back to basics' strategy reboot back in 2009.
'The most significant opportunity, in our view, continues to be the development of the company’s on line platform as the company endeavours to be the ‘category killer’ sportswear and sports product site,' Calvert said, noting that online has been growing at 130% a year over the past three years and now accounts for over 15% of total sales.
Shares in the group closed at 650p on Wednesday, down 3.5p or 0.5%.