The Expert View: Wood Group, Thomas Cook and Amlin

Our daily round-up of analyst recommendations and commentary, featuring Wood Group, Thomas Cook, Amlin, Serco and Consort Medical.

Key stats
Market capitalisation	£2,784m
No. of shares out	371m
No. of shares floating	297m
No. of common shareholders	not stated
No. of employees	39200
Trading volume (10 day avg.)	1m
Turnover	3,489m USD
Profit before tax	28m USD
Earnings per share	0.08 USD
Cashflow per share	0.30 USD
Cash per share	0.38 USD

*Correct as at 20 Dec 2012

Canaccord upgrades Wood Group to 'buy'

James Evans, analyst at Canaccord, has upgraded oil services business Wood Group (WG.L) from 'hold' to 'buy', saying the recent dip in the shares offers an appealing buying window.

The shares have lost almost 15% since the start of November, which Evans attributed to concerns about its engineering unit, where where headcount growth has slowed markedly over the second half of the year.

'Oil Services continue to offer relatively good growth, with underlying replacement costs for oil continuing to rise, providing structural growth, particularly in offshore and deepwater environments,' Evans said.

'Despite this stronger long-term outlook, the last six months has seen a moderation in demand growth across the majority of the sector, with a number of companies providing pseudo-profit warnings.'

Evans said there's still lots of work to be won in the Gulf of Mexico, and he expects a compound annual growth rate of 15%+ at the company over the next two years.

Shares in the group closed at 748.7p on Thursday, up 8.7p or 1.2%.

Key stats
Market capitalisation	£395m
No. of shares out	891m
No. of shares floating	871m
No. of common shareholders	not stated
No. of employees	31097
Trading volume (10 day avg.)	27m
Turnover	£9,491m
Profit before tax	£-586m
Earnings per share	-67.20p
Cashflow per share	-44.70p
Cash per share	51.96p

*Correct as at 20 Dec 2012

Peel Hunt upgrades tenacious Thomas Cook to 'hold'

Nick Batram, analyst at Peel Hunt, has upgraded travel agent Thomas Cook (TCG.L) from 'sell' to 'hold' following some reassuring recent results and a stonking rise in the shares, but he warned that there's still a lot of work to do.

'Whilst the current performance and financial position of the group is not great, it is fair to say that it is better than we thought it might be,' Batram said.

Following the group's latest trading update the analyst has upgraded his 2013 pre-tax profit forecast by 28% to £56.5 million. His target price rises from 10p to 41p.

'This is the honeymoon period for new management and sentiment towards the stock is now focused on how far and how quickly the turnaround can be delivered as opposed to questioning the group’s survival. This leads us to move from sell to hold. However, the task in turning around the business should not be underestimated,' he added.

Shares in the group closed at 45.5p on Thursday, up 2.8p or 6.4%.

Key stats
Market capitalisation	£1,927m
No. of shares out	497m
No. of shares floating	486m
No. of common shareholders	not stated
No. of employees	1469
Trading volume (10 day avg.)	1m
Turnover	£1,927m
Profit before tax	£-150m
Earnings per share	-30.34p
Cashflow per share	-28.19p
Cash per share	51.62p

*Correct as at 20 Dec 2012

Shore Capital: buy Amlin while the shares are down

Eamonn Flanagan, analyst at Shore Capital, has urged investors to take advantage of an expected decline in Amlin (AML.L) shares following news on its 'super storm' Sandy liability.

Amlin expects the storm to cost it £145 million net of reinsurance, a near total loss on its exposure.

'This equates to about 25p per share, or about 10% of the H1 2012 net tangible asset value ex dividend (Beazley: 7.7%, Catlin: 8.5%, Hiscox: 6.6%),' Flanagan said. 'To us, this figure is slightly higher than we would have expected, based on Amlin's approximate market share within Lloyd's.'

The analyst expects the shares to fall following the announcement, but he sees this as an opportunity for investors. 'We would view any such weakness as an excellent buying opportunity and reiterate our BUY recommendation,' he said.

Shares in the group closed at 387.6p on Thursday, down 1.1p or 0.3%.

Key stats
Market capitalisation	£2,723m
No. of shares out	498m
No. of shares floating	485m
No. of common shareholders	not stated
No. of employees	76670
Trading volume (10 day avg.)	1m
Turnover	£4,646m
Profit before tax	£175m
Earnings per share	35.08p
Cashflow per share	52.23p
Cash per share	51.23p

*Correct as at 20 Dec 2012

Seymour Pierce says 'buy' Serco

Caroline de La Soujeole, analyst at Seymour Pierce, has reiterated her 'buy' recommendation on government services company Serco (SRP.L) following confirmation that it's on track to meet expectations for the year.

In a brief pre-close statement Serco's management said they expect 'to deliver another year of strong revenue growth, including further good organic growth, together with an increase in adjusted operating margin similar to that achieved in 2011'.

De La Soujeole is expecting pre-tax profits over the year to come in at £275.7 million, compared with a consensus analyst estimate of £271.7 million.

'The shares are trading on a FY12E price to earnings of 13.5x compared with their five-year through the cycle average of 16.2x,' she noted. 'We remain BUYers of the shares on account of the company’s geographical and operational diversity which we believe puts the company in a strong position to deliver growth.'

Shares in the group closed at 544.5p on Thursday, up 0.5p or 0.1%.

Key stats
Market capitalisation	£239m
No. of shares out	29m
No. of shares floating	27m
No. of common shareholders	not stated
No. of employees	1163
Trading volume (10 day avg.)	0m
Turnover	£141m
Profit before tax	£14m
Earnings per share	47.91p
Cashflow per share	78.40p
Cash per share	50.62p

*Correct as at 20 Dec 2012

FinnCap sticks with 'sell' on Consort Medical after King Systems sale

Keith Redpath, analyst at FinnCap, has put his target price for pharmaceutical services group Consort Medical (CSRT.L) under review on news it's to sell its King Systems division, but he still thinks the shares are overpriced.

Consort is selling the business to Danish diagnostic and life-supporting equipment developer Ambu A/S for an initial $120 million and contingent payments of up to $50 million over the next three years. King Systems makes masks, tubes and other pieces of medical equipment used in the treatment of respiratory conditions.

'With the sale of King Systems, Consort has retrenched to its historical positioning as a pharmaceutical packaging company with revenues (excluding tooling) below £100 million, which implies a similar sales multiple to that it achieved on the sale of King,' Redpath said.

'Our target price is now under review, but we believe the shares remain overvalued, and retain our Sell recommendation.'

Shares in the group closed at 820p on Thursday, up 29p or 3.7%.