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The Expert View: Weir, Lloyds Banking Group and Regus
by Michelle McGagh on Feb 04, 2014 at 05:01
Our daily round-up of analysts recommendations and commentary, also including RM and Consort Medical.
Our daily round-up of analyst recommendations and commentary, featuring Lloyds, Weir Group, RM, Regus and Consort Medical.
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‘Unloved’ Weir could become interesting pick
Oil pump maker Weir Group (WEIR.L) may not be ‘well loved’ by the market but bid speculation has increased interest in the stock.
This interest is not enough for Jefferies’ analyst Andy Douglas to upgrade his rating and the shares remain a ‘hold’.
Cutting his price target from £25.00 to £23.35, Douglas predicted another ‘challenging year’ for the company due to currency headwinds. But if other concerns dissipate Weir could see a ‘sentiment shift towards the group, with a modest valuation highlighting why this could become interesting to investors’, the analyst said.
He added: ‘Weir is not particularly well loved by the market, and on occasions is unfairly treated. The group has strong businesses, but we do also recognise that its principal end markets offer challenges/ opportunities and in some respects these will continue into FY15.’
At the time of writing shares were up 2.4%, or 51p, at £21.45.
Lloyds investors await dividend reinstatement
Shore Capital has reiterated its ‘buy’ recommendation for Lloyds (LLOY.L) after the bank announced it has received the ‘green light’ to resume dividend payments in the second half of the year.
Analyst Gary Greenwood placed a target price of 83p on the shares following an unscheduled trading update by the bank.
The update was mixed; on the plus side 2013 full year profits are ahead of consensus but the bank was forced to make further £1.8 billion provision for payment protection insurance mis-selling. Despite the set-back it expects to make a small profit.
‘The company has announced that it has been given the ‘green light’ to apply to the [regulator] to resume dividend payments in H2 2014, applying a progressive dividend policy that will move the company to a 50% dividend pay-out ratio over the medium term,’ said Greenwood. ‘While the ultimate pay-out ratio is in line with our expectations, the time frame for achieving it is somewhat slower than we had anticipated and is therefore a little disappointing we think.’
At the time of writing shares were down 3.48%, or 2.8p, at 80p.
Regus upgraded after overly cautious valuations
Serviced office business Regus (RGU.L) has been upgraded from ‘hold’ to ‘buy’ by analysts Peel Hunt, who said they had been ‘too cautious in valuing Regus’ growth potential’.
Analyst Andrew Shepherd-Barron increased his target price for Regus from 230p to 290p and said ‘only a little further reassessment of risk [would] see it worth 412p’.
He said long-term benefit had not yet been recognised in the company.
‘Investors have begun to look through the impact on near-term earnings of the growth investment, as can been seen from a relaxed attitude to recent downgrades following more aggressive growth in 2013,’ said Shepherd-Barron.
‘This re-appraisal has much further to go, in that the value of future growth is still not being adequately captured.’
At the time of writing shares were up 0.24%, or 0.5p, at 210p.
RM is top of the class after Numis upgrade
Educational IT and software supplier RM (RM.L) has been upgraded from ‘add’ to ‘buy’ following the announcement of a special dividend.
Numis analyst Will Wallis also increased the target price on the shares to 165p from 140p after the company announced it would pay a £15 million special dividend of 16p a share.
Wallis said that RM produced full year 2013 results ‘modestly ahead of our forecasts’ and ‘the outlook statement is positive’ which had led it to increase its 2014 and 2015 forecasts.
‘Education resources produced a lower result than in 2012, but in the context of the absence of a supermarket-sponsored voucher programme the result looks good,’ he said. ‘Education technology produced strong profits and management comments that the hardware exit is running to time and budget.
‘Assessment and data services produced improved profitability, with several contract extensions, although new customer wins were weaker than hoped.’
At the time of writing shares had jumped 10.7%, or 12p, to 127p.
Migraine drug will be a headache for Consort Medical
The approval of Consort Medical’s (CSRT.L) new migraine drug is not enough to save it from a ‘sell’ recommendation.
FinnCap analyst Keith Redpath placed a target price of 690p on the shares despite the approval of the drug, which is known as sumatriptan and is a generic version of GlaxoSmithKline’s migraine drug.
‘We do not believe it is a significant commercial opportunity for Consort given the crowded US generic sumatriptan market,’ he said.
‘We reiterate our ‘sell’ recommendation and our 690p target price on valuation grounds: any share price strength on this announcement presents an opportunity to realise recent gains.’
At the time of writing shares were up 1.31%, or 14p, at £10.80.