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The Expert View: WH Smith, Standard Chartered and Taylor Wimpey
by Harry Brooks on Oct 11, 2013 at 05:01
A roundup of analysts' commentary on shares, also including Synergy Healthcare and Marston's.
Our daily round-up of analyst recommendations and commentary, featuring WH Smith, Standard Chartered, Taylor Wimpey, Synergy Healthcare and Marston's.
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Cantor Fitzgerald lifts target price for WH Smith
Cantor Fitzgerald has increased its target price for WH Smith (SMWH.L) after the high street stationery chain announced a 6% rise in annual pre-tax profits and said it would buy back £50 million worth of shares.
Analyst Freddie George has a 'buy' recommendation on the shares, and he said the company is now entering an exciting new phase.
'We believe the company is entering an interesting development period with its international expansion, which could potentially become a sizeable income stream,' he said.
'In the meantime, we view SMWH as a sustainable long term double digit EPS growth story with Travel as a high single to double-digit growth business supported by a pedestrian High Street cash cow and buy-back programme.'
George's target price rises from 900p to 950p.
Shares in the group closed at 882p on Thursday, up 47p or 5.6%.
Standard Chartered too big and complex, Berenberg Bank warns
Berenberg Bank has reiterated its 'sell' recommendation on Standard Chartered (STAN.L) and cut its target price, saying the bank has become too big and complicated to sustain its rate of growth without taking on some big risks.
'Historically, buying Standard Chartered when it has been trading on a single-digit 12-month forward price to earnings has proven a successful investment strategy,' analyst James Chappell said.
'We think this no longer holds as the company has become too big, too complex and is an investment bank in all but name.'
Standard Chartered now derives 42% of its revenues from investment banking, Chappell said, which implies greater potential for volatility than in the past. The bank's exposure to emerging markets is also adding to the potential for volatility at the moment, he added.
Chappell's target price falls from £14.50 to £12.
Shares in the group closed at £14.69p on Thursday, up 33.5p or 2.3%.
Housing stimulus: practically taylor-made for Taylor Wimpey
The government's efforts to stir up the property market could hardly have been better judged to help homebuilder Taylor Wimpey (TW.L), according to Bank of America Merrill Lynch.
'Government support has been helpful and from TW's view, HMG could not have come up with anything better for the purpose,' said analysts at the bank, who have a 'buy' recommendation on the shares.
The Funding for Lending Scheme has freed up capital and heated up the offerings in the 80% to 85% loan-to-value range, the analyst added.
'Capital return will come, the decision will be announced at the FY results,' the analysts said. 'If they surprise the market and defer a decision/delay a return, it will be largely due to land investment which will be viewed positively longer term, and lead to a surplus capital position ultimately.'
Shares in the group closed at 107.1p on Thursday, up 3.3p or 3.2%.
Synergy Healthcare is oversold, Investec says
Investec has reiterated its 'buy' recommendation on Synergy Healthcare (SYR.L), saying the recent sell-off presents investors with an attractive opening.
Synergy, which offers specialist outsourced services to healthcare providers, delivered in-line interim pre-close trading update, which analyst Nicholas Keher said should placate the market.
'Whilst organic growth has been held back, management have offset this with a solid margin performance,' Keher said.
'We think Synergy is set to deliver long-term earnings growth as the wave of outsourcing to specialist companies continues. With our enterprise value/earnings model suggesting a fair price of 1140p, we think the recent sell-off has been overdone and the share price represents a good Buying opportunity.'
Shares in the group closed at £10.03 on Thursday, down 2p or 0.2%.
JP Morgan drops target price for Marston's
JP Morgan has lowered its target price for pubco Marston's (MARS.L) as it continues to struggle with the tenanted pubs format.
Wednesday's year-end statement showed sales in the group's 'destination' and 'premium' pubs up 2.2% year-on-year. However, sales in tenanted pubs - which are managed by individual landlords but owned by the pubco - remained 'subdued', which the statement said was in line with the industry-wide trend.
Analyst Victoria Greer said she expects the tough trading to leave a mark on the bottom line: 'We reduce our FY13E Taverns divisional earnings forecast by £2 million to £70 million, driven by ongoing weakness in the tenanted pubs,' she said.
Greer's target price falls from 160p to 140p.
Shares in the group closed at 143p on Thursday, down 1.5p or 1%.