Citywire printed articles sponsored by:
View the rest of this gallery online at http://citywire.co.uk/wealth-manager/gallery/a648656
The Expert View: Tesco, RBS and Betfair
by Harry Brooks on Jan 07, 2013 at 05:01
A roundup of some of the best analyst commentary on shares, including Amara Mining and Restaurant Group.
Our daily round-up of analyst recommendations and commentary, featuring Tesco, RBS, Betfair, Amara Mining and Restaurant Group.
Nomura: Tesco is winning the battle of the supermarkets
Nick Coulter, analyst at Nomura, has reiterated his 'buy' recommendation on Tesco (TSCO.L), expecting it to have won the battle for the nation's Christmas spending money.
Along with Sainsbury's and Morrisons, Tesco will report its trading results this week, and Coulter expects the red and blue to prevail. 'We expect Tesco to hold and marginally beat a soft comparison to post a six-week like-for-like (LFL) of +1%, outpacing both Sainsbury (estimated to have flat LFLs across Christmas and +0.8% for Q3) and Morrison (with a six-week LFL forecast of -2.5%),' he said.
More importantly, Coulter expects Tesco’s trading update to offer evidence of improving sales volumes.
Coulter said Tesco's 'reset' will make it tough for Sainsbury's to deliver higher sales in spite of its solid management, while for Morrisons he warned 'we err on the side of caution believing earnings-per-share risk to be to the downside'.
Shares in the group closed at 349.4p on Friday, down 0.6p or 0.2%.
Investec stays bearish on RBS
Ian Gordon, analyst at Investec, has increased his target price for Royal Bank of Scotland Group (RBS.L) following a strong few months for the shares, but he retains a 'sell' stance, saying the outlook remains weak.
A fine of about £400 million for Libor manipulation is expected imminently, but Gordon said this is a 'drop in the ocean' compared with his estimate for fourth-quarter losses.
'In Q4 2012e, regulatory costs/redress, increased restructuring costs, flat non-core losses and an elevated tax charge underpin our forecast of an attributable loss of £1.4 billion,' he said. 'In 2013-15e, we see a return to profit with a modest improvement in core profitability (despite an offset from EC-mandated business disposals).
'However, with a very weak outlook for ROE, we remain sellers. Our return on equity/cost of equity derived target price rises to 290p (from 265p).'
Shares in the group closed at 333.8p on Friday, up 1.4p or 0.4%.
Peel Hunt downgrades Betfair to 'hold'
Nick Batram, analyst at Peel Hunt, has downgraded Betfair (BET.L) from 'buy' to 'hold', saying it's going to take a while to realise the company's true potential.
Batram has updated his forecasts following December's accounting changes announced alongside the interims and to reflect the disposal of a majority stake in foreign exchange trading hub LMAX.
This adjustment results in his 2013 pre-tax profit forecast almost doubling to £35.8 million, but the earnings picture isn't so good. 'The biggest impact from the accounting changes is the move to reduce the amount of development expenditure that is capitalised and the effects of writing down about £46 million of previously capitalised costs,' he said.
'However, if we look at the business (ex Betfair US) then our earnings forecast is reduced by 5% and the equivalent earnings per share is just 3% higher.'
With no near-term catalysts to galvanise the shares, Batram has opted to downgrade.
Shares in the group closed at 670.5p on Friday, down 13p or 1.9%.
Westhouse sees bright future for Amara Mining
Rob Broke, analyst at Westhouse, has reiterated his 'buy' recommendation on Amara Mining (AMA.L) (formerly Cluff Gold), expecting lots of positive newsflow in the months ahead.
'Amara has recently managed to breathe life into all three of its projects and I'm hopeful that the work the company is undertaking during 2013 will convince the market that the company will continue to make good progress towards its goal of becoming a mid-tier producer,' he said.
The first quarter of the year should see an initial resource estimate at its Côte d'Ivoire project Yaoure, plus mining and environmental licences for its Burkina Faso Sega mine.
The second quarter, meanwhile, should see the completion of a feasibility study at Baomahun (Sierra Leone) and the start of trucking of ore at Sega.
'Overall therefore we expect the first half of 2013 to be positive for Amara and are maintaining our buy recommendation and 124p target price,' he said.
Shares in the group closed at 58.5p on Friday, down 0.3p or 0.4%.
Canaccord backs Restaurant Group as UK consumers tighten their belts
Wayne Brown, analyst at Canaccord, has reiterated his 'buy' recommendation on The Restaurant Group (RTN.L) ahead of a trading statement on Wednesday.
The group is looking well placed to beat Brown's forecasts, with like-for-like sales up 3.5% after 43 weeks of trading.
Although Brown said the sector's set for a tough year as disposable incomes remain under pressure, this could play to RTN's strengths.
'The group has taken full advantage of the consumer shift away from the high street to leisure and retail parks,' he said. 'Being firmly placed in the value for money segment of the market, it has avoided the majority of deep discounting that has plagued the sector, thereby protecting brand equity.'
Shares in the group closed at 386.2p on Friday, down 1.9p or 0.5%.