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The Expert View: Vodafone, Babcock and SuperGroup
by Harry Brooks on Feb 08, 2013 at 05:01
A roundup of some of the best analyst commentary on shares, including Ocado and Avon Rubber.
Our daily round-up of analyst recommendations and commentary, featuring Vodafone, Babcock, SuperGroup, Ocado and Avon Rubber.
Vodafone shares still a good buy, Charles Stanley says
Charles Stanley analyst Jeremy Batstone-Carr has reiterated his 'accumulate' recommendation on Vodafone (VOD.L), in spite of what he called a 'dismal' set of results.
The company reported a 2.6% decline in group service revenues for the last three months of 2012, hit hard by continued weakness in Europe. Chief executive Vittorio Colao said: ‘Our results continue to reflect very difficult market conditions in Europe.'
Batstone-Carr said the results came as no surprise to analysts. 'The results were a bit dismal, involving further sequential deterioration, but this was against the background of very low expectations as the headwinds of European macro, medium-term revenue reductions and increasing competition were clear to investors.'
He believes the shares remain a good bet. 'Overall, we believe that investors should be able to ignore some possible volatility in the share price while they receive a very decent yield, and that the company’s position in 12-18 months, with some improvement in Europe either occurring or at least anticipated, will be better than it is today.'
Shares in the group closed at 173.3p on Thursday, up 2.9p or 1.7%.
Babcock to beat Capita, Westhouse says
Westhouse analyst Michael Donnelly has reiterated his 'add' recommendation on outsourcing giant Babcock International (BAB.L), saying it continues to outpace rival Capita (CAP.L).
'Our outsourcer actions stocks Babcock (Buy) and Capita (Sell) have performed in line with our recommendations of 4 October 2012. Capita has underperformed the FTSE by 5%, while Babcock has outperformed by 2%, giving a c.7% total spread on our main calls,' he said.
'Do we expect this relative performance to continue? Well, we still see 10% upside to our 1142p target price for Babcock (17% downside to 661p for Capita), and the broadly supportive news flow since October appears to support an unchanged stance on the two stocks.'
Shares in the group closed at £10.44 on Thursday, up 2p or 0.2%.
Seymour Pierce backs SuperGroup
Seymour Pierce analyst Freddie George has reiterated his 'buy' recommendation on fashion retailer SuperGroup (SGP.L) following an encouraging trading update.
In the 13 weeks to 27 January total group sales increased by 12.3% to £115.1 million, missing George's prediction of a 14.6% rise - the analyst said this was a result of less clearance activity. Like-for-like growth, however, was the strongest for six quarters at 10.6%, well ahead of the analyst's 1% prediction.
'The growth was pretty consistent over the quarter, including in January, which gives us confidence that not only are the traditional winter categories, such as jackets and knitwear, selling well, but also the new ranges,' he said.
'This update should represent a turning point in the company’s fortunes. We believe that after a year of consolidation, the company has now established a platform in terms of infrastructure and management to push ahead in developing the brand on a multi-channel and overseas basis.'
Freddie George owns SuperGroup shares, and Seymour Pierce is a market maker for the group.
Shares in SuperGroup closed at 701p on Thursday, up 67.5p or 10.7%.
We're still waiting for Ocado to deliver
Ocado (ODO.L)'s preliminary results will do nothing to appease the doubters, Shore Capital analyst Clive Black has warned, reiterating his 'sell' recommendation.
In the year to November 2012 earnings came to £33.5 million, in line with the analyst's forecasts, and pre-tax losses amounted to £2.8 million. No dividend was declared.
'Ocado has confirmed another poor year from a financial performance perspective and this set of results does little to change our cautious investment stance on Ocado's shares,' the analyst said.
'And so we wait for Ocado to go through the rubicon of material positive margin expansion that leads to retained profitability building and the prospect of a dividend in time. Meanwhile the clock ticks and the world moves on, most notably the date for the Waitrose contract renegotiation moves closer whilst the same Waitrose eats into Ocado's share in its most profitable market.'
Shares in the group closed at 115.9p on Thursday, up 12p or 11.6%.
WH Ireland lifts target price for Avon Rubber
WH Ireland analyst John Cummins has increased his target price for Avon Rubber (AVON.L) following a solid trading update.
'Avon Rubber has released a solid trading update this morning, with both divisions performing well, albeit with some fluctuation in demand at Dairy as a result of the lower milk price and increase in feed costs,' he said.
'The shares have moved ahead by 20% since the beginning of January and whilst there is nothing in the statement that is likely to get the shares moving higher in the short term, given the long-term growth potential for both divisions, we continue to see scope for further outperformance during 2013.'
Although he said the shares will probably pause for breath for a bit the results were encouraging enough to persuade Cummins to lift his target price from 370p to 490p, believing there's potential for growth longer term.
Shares in the group closed at 437p on Thursday, down 9p or 2%.