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The Expert View: Standard Life, Carpetright & Carnival
by Michelle McGagh on Mar 27, 2014 at 05:01
Our daily roundup of the best analyst commentary on shares, also including Entertainment One and Cobham.
Standard Life/Ignis deal is attractive but scuppers hopes of special divi
The acquisition of fund management group Ignis by insurer Standard Life (SL.L) for £390 million has been welcomed by Shore Capital analysts as an ‘attractive proposition’. Analyst Eamonn Flanagan reiterated a ‘hold’ recommendation after the insurer paid in cash for the fund group’s £59 billion funds under management.
‘This purchase price is very much in the range that we expected and appears an attractive proposition for Standard Life as it moves comprehensively towards the asset accumulation/management model,’ he said.
Flanagan added that the deal makes it unlikely that a special dividend payout will ‘be on the cards in the short term’.
The addition of Ignis to Standard Life Investments means that third party funds under management now account for 64% of the total and 81% of revenue.
Carpetright not aspirational enough for Cantor
Another profit warning for Carpetright (CPR.L) has caused further damage to the brand and led Cantor to revise down its full year 2014 forecasts.
Analyst Freddie George reiterated a ‘sell’ recommendation and placed a target price of 420p on the shares as the company’s latest trading update brought with it yet another profit warning. Results have been affected by weak UK performance, which has not seen any benefit from the housing boom, and poor figures in Holland.
‘Following this update we are revising down our FY14 pre-tax profit forecasts from £8.5 million to £4.5 million taking earnings per share down from 9.1p to 4.9p,’ said George, adding that the company would struggle to compete with independent rivals with its current strategy. ‘It is too focused on price… and not aspirational enough for mainstream customers,’ he said.
Carnival fun is over after Numis downgrade
Global cruise company Carnival Corporation (CCL.L) has been downgraded by Numis as strong bookings fail to translate into higher prices.
Analyst Wyn Ellis downgraded the stock from ‘buy’ to ‘hold’ and placed a target price of £25.50 as he said quarterly results were disappointing when compared to ‘more optimistic updates from Royal Caribbean and Norwegian Cruise Lines’.
Since January bookings volumes have run well ahead of last year but at lower prices. ‘In the wake of more confident recent updates from [its peers] we find this uninspiring and it suggests to us that Carnival’s brands may be continuing to suffer from legacy issues,’ said Ellis. ‘Carnival, however, claims that there has been an improvement in customer brand perception, which is running ahead of expectations.’
Cobham upgraded on pragmatic approach to defence cuts
Defence and security specialist Cobham (COB.L) has an impressive track record and has now been upgraded by Barclays thanks to its pragmatic approach to cuts in US defence spending.
Analyst Nick Webster upgraded the stock from ‘underweight’ to ‘equal weight’ and placed a new price target of 315p on the shares.
‘Cobham has an impressive track record of growth, cash flow and return on capital employed and we believe the company has the most pragmatic, if not negative outlook for US defence,’ he said. ‘With attractive programmatic exposure, this gives scope for positive surprise.’
Additionally, the company has a ‘strong balance sheet that ‘provides ample room for 10% dividend growth and further acquisitive expansion into non-defence activities’.
However, Webster said the lack of earnings per share growth and the fact that the shares were trading above 10-year averages prevented him from upgrading further to ‘positive’.
Entertainment One upgraded as earnings fall in line
Independent film distributor Entertainment One (ETO.L) has been upgraded by Peel Hunt on the back of a strong pre-close trading update.
Analyst Malcolm Morgan has upgraded the stock from ‘hold’ to ‘buy’ and increased the target price from 300p to 370p.
The company, which provides sales, distribution and marketing for films and television programmes is showing improvement but could face a reduction in revenue as the Canadian dollar faces pressure.
‘Earning for 2014 are to be in line with expectation, with revenue and earnings before interest, taxes, depreciation and amortisation better than last year,’ said Morgan. ‘Within this guidance there is room to see consensus revenue reduce – capturing the pressure on the Canadian dollar, but a robust margin performance securing the sterling level of profit. We update our forecast… and on a one year view suggest a target price of 370p.’