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View the rest of this gallery online at http://citywire.co.uk/money/gallery/a1017473
Our daily roundup of analyst commentary on shares, also including Brewin Dolphin and Wincanton.
SSE dividend under threat, says Jefferies
Dividend sustainability is under threat at energy provider SSE (SSE) due to regulatory intervention in the UK, says Jefferies.
Analyst Ahmed Farman retained his ‘hold’ recommendation and target price of £14.00 on the stock, which was trading up 0.7%, or 10p, at £14.61 at the time of writing.
‘Full-year 2016/17 reported earnings per share was 125.75p, slightly ahead of the 122-125p range given at the pre-close update. In full-year 2017/18, SSE expects to continue to increase dividend per share by the retail prices index, with a dividend cover to the lower end of the range,’ he said.
‘[The] update suggests to us that SSE is unlikely to be able to maintain its dividend cover in the case of further punitive regulatory intervention in the UK. In such a case, the sustainability of SSE’s dividend will increasingly come into question.’
He added that the company had invested at ‘record levels’ over the past few years ‘in order to stand still from a profit perspective’ and with headwinds such as low power prices, it was becoming tougher to maintain the dividend.
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| Key stats | |
|---|---|
| Market capitalisation | £6,686m |
| No. of shares out | 1,030m |
| No. of shares floating | 1,023m |
| No. of common shareholders | not stated |
| No. of employees | 589 |
| Trading volume (10 day avg.) | 5m |
| Turnover | £544m |
| Profit before tax | £1,345m |
| Earnings per share | 123.51p |
| Cashflow per share | 125.44p |
| Cash per share | 10.96p |
Hargreaves Lansdown: British Land ‘uncomfortable’ about the future
British Land (BLND) may have posted positive full-year results but Hargreaves Lansdown says the company is ‘uncomfortable about the future’.
British Land’s full-year underlying profits – rental income minus expenses – rose 7% in 2016/17 to £390 million but the net asset value fell 0.4% to £9.5 billion, or 915p a share.
Although the group increased the dividend 3% and proposed another 3% rise for the coming year the shares were down 2.2%, or 15p, at 659p at the time of writing.
Analyst Nicholas Hyett said the headline numbers were ‘pretty good’ and dividend growth was of most importance to investors.
‘However, British Land is clearly uncomfortable about the future,’ he said.
‘Speculative developments have been reined right back and leverage is falling as the group sells some high profile assets, including a 50% stake in the Cheesegrater. That’s sensible given the group’s disproportionate exposure to the prestige London office space most likely to be hit if Brexit results in a mass exodus of bankers, lawyers and the like. However, it suggests the group feels there could be stormy weather ahead.’
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| Key stats | |
|---|---|
| Market capitalisation | £5,137m |
| No. of shares out | 1,016m |
| No. of shares floating | 694m |
| No. of common shareholders | not stated |
| No. of employees | 19489 |
| Trading volume (10 day avg.) | 2m |
| Turnover | £1,457m |
| Profit before tax | £211m |
| Earnings per share | 20.72p |
| Cashflow per share | 33.59p |
| Cash per share | 21.17p |
Merlin is undervalued, says Barclays
Alton Towers owner Merlin Entertainments (MERL) may not look cheap but Barclays believes there is a lot that is being undervalued.
Analyst Vicki Stern reiterated her ‘overweight’ recommendation and target price of 575p on the stock following a roadshow. The shares were trading flat at 502p at the time of writing.
‘One of the questions posed on the last roadshow we hosted with management was: ‘What is the market missing?’. With the stock trading at 22x 2017 price/earnings, one might argue “not much”, but in fact we think there is a lot that is being underestimated/undervalued,’ she said.
While Stern said the stock was ‘unlikely to ever look “cheap” on a one-year price/earnings given its growth characteristics’ there was more potential for the company thanks to an accommodation rollout, which she said was ‘potentially the most under-appreciated piece of the story’.
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| Key stats | |
|---|---|
| Market capitalisation | £924m |
| No. of shares out | 283m |
| No. of shares floating | 245m |
| No. of common shareholders | not stated |
| No. of employees | 1743 |
| Trading volume (10 day avg.) | 1m |
| Turnover | £282m |
| Profit before tax | £39m |
| Earnings per share | 13.86p |
| Cashflow per share | 18.93p |
| Cash per share | 60.72p |
Growth strategy proving successful for Brewin Dolphin, says Peel Hunt
Wealth manager Brewin Dolphin (BRW) has posted record growth inflows as it moves towards a growth strategy, which Peel Hunt is predicting to be a success.
Analyst Stuart Duncan retained his ‘add’ recommendation but increased the target price from 320p to 345p after interim results showed profits up 14% to £32.4 million and total net inflows of £600 million.
‘Although overall results were largely as expected, the highlight of the first half has been the organic growth rate of 7.6%, with record gross inflows generated,’ he said.
‘This confirms the change in emphasis towards growth, and the success of the strategy to enhance distribution.’
He added: ‘The stock now trades on a December 2017 enterprise value/ profits multiple of 15.1x, which like the rest of the sector has expanded over recent months – the multiple stood at c.13.5x back in January.’
The shares were trading down 0.8%, or 2p, at 327p at the time of writing.
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| Key stats | |
|---|---|
| Market capitalisation | £364m |
| No. of shares out | 124m |
| No. of shares floating | 115m |
| No. of common shareholders | not stated |
| No. of employees | 17500 |
| Trading volume (10 day avg.) | m |
| Turnover | £1,147m |
| Profit before tax | £61m |
| Earnings per share | 47.36p |
| Cashflow per share | 59.85p |
| Cash per share | 21.25p |
Liberum: positive momentum at Wincanton
Logistics specialist Wincanton (WIN) has posted full-year results slightly ahead of expectations and Liberum believes the positive momentum will continue.
Analyst Gerald Khoo retained his ‘buy’ recommendation and target price of 290p on the stock after the company posted year-on-year profit growth of 18%.
The shares were trading up 4.3%, or 12p, at 286p at the time of writing.
‘Encouraging results, slightly ahead of expectations, supported by contract renewals and new business wins,’ he said.
‘Profit growth rates were flattered by a weak comparative impacted by loss-making Pullman contracts that ended last year, but we believe there was good underlying progress in all areas. We expect more of the same in the new full year, supported by a steady stream of new business wins.’
Khoo added that despite the strong performance the valuation was still ‘attractive’.
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| Key stats | |
|---|---|
| Market capitalisation | £14,705m |
| No. of shares out | 1,005m |
| No. of shares floating | 999m |
| No. of common shareholders | not stated |
| No. of employees | 21118 |
| Trading volume (10 day avg.) | 4m |
| Turnover | £28,781m |
| Profit before tax | £461m |
| Earnings per share | 46.01p |
| Cashflow per share | 126.28p |
| Cash per share | 35.75p |
SSE dividend under threat, says Jefferies
Dividend sustainability is under threat at energy provider SSE (SSE) due to regulatory intervention in the UK, says Jefferies.
Analyst Ahmed Farman retained his ‘hold’ recommendation and target price of £14.00 on the stock, which was trading up 0.7%, or 10p, at £14.61 at the time of writing.
‘Full-year 2016/17 reported earnings per share was 125.75p, slightly ahead of the 122-125p range given at the pre-close update. In full-year 2017/18, SSE expects to continue to increase dividend per share by the retail prices index, with a dividend cover to the lower end of the range,’ he said.
‘[The] update suggests to us that SSE is unlikely to be able to maintain its dividend cover in the case of further punitive regulatory intervention in the UK. In such a case, the sustainability of SSE’s dividend will increasingly come into question.’
He added that the company had invested at ‘record levels’ over the past few years ‘in order to stand still from a profit perspective’ and with headwinds such as low power prices, it was becoming tougher to maintain the dividend.
| Key stats | |
|---|---|
| Market capitalisation | £6,686m |
| No. of shares out | 1,030m |
| No. of shares floating | 1,023m |
| No. of common shareholders | not stated |
| No. of employees | 589 |
| Trading volume (10 day avg.) | 5m |
| Turnover | £544m |
| Profit before tax | £1,345m |
| Earnings per share | 123.51p |
| Cashflow per share | 125.44p |
| Cash per share | 10.96p |
Hargreaves Lansdown: British Land ‘uncomfortable’ about the future
British Land (BLND) may have posted positive full-year results but Hargreaves Lansdown says the company is ‘uncomfortable about the future’.
British Land’s full-year underlying profits – rental income minus expenses – rose 7% in 2016/17 to £390 million but the net asset value fell 0.4% to £9.5 billion, or 915p a share.
Although the group increased the dividend 3% and proposed another 3% rise for the coming year the shares were down 2.2%, or 15p, at 659p at the time of writing.
Analyst Nicholas Hyett said the headline numbers were ‘pretty good’ and dividend growth was of most importance to investors.
‘However, British Land is clearly uncomfortable about the future,’ he said.
‘Speculative developments have been reined right back and leverage is falling as the group sells some high profile assets, including a 50% stake in the Cheesegrater. That’s sensible given the group’s disproportionate exposure to the prestige London office space most likely to be hit if Brexit results in a mass exodus of bankers, lawyers and the like. However, it suggests the group feels there could be stormy weather ahead.’
| Key stats | |
|---|---|
| Market capitalisation | £5,137m |
| No. of shares out | 1,016m |
| No. of shares floating | 694m |
| No. of common shareholders | not stated |
| No. of employees | 19489 |
| Trading volume (10 day avg.) | 2m |
| Turnover | £1,457m |
| Profit before tax | £211m |
| Earnings per share | 20.72p |
| Cashflow per share | 33.59p |
| Cash per share | 21.17p |
Merlin is undervalued, says Barclays
Alton Towers owner Merlin Entertainments (MERL) may not look cheap but Barclays believes there is a lot that is being undervalued.
Analyst Vicki Stern reiterated her ‘overweight’ recommendation and target price of 575p on the stock following a roadshow. The shares were trading flat at 502p at the time of writing.
‘One of the questions posed on the last roadshow we hosted with management was: ‘What is the market missing?’. With the stock trading at 22x 2017 price/earnings, one might argue “not much”, but in fact we think there is a lot that is being underestimated/undervalued,’ she said.
While Stern said the stock was ‘unlikely to ever look “cheap” on a one-year price/earnings given its growth characteristics’ there was more potential for the company thanks to an accommodation rollout, which she said was ‘potentially the most under-appreciated piece of the story’.
| Key stats | |
|---|---|
| Market capitalisation | £924m |
| No. of shares out | 283m |
| No. of shares floating | 245m |
| No. of common shareholders | not stated |
| No. of employees | 1743 |
| Trading volume (10 day avg.) | 1m |
| Turnover | £282m |
| Profit before tax | £39m |
| Earnings per share | 13.86p |
| Cashflow per share | 18.93p |
| Cash per share | 60.72p |
Growth strategy proving successful for Brewin Dolphin, says Peel Hunt
Wealth manager Brewin Dolphin (BRW) has posted record growth inflows as it moves towards a growth strategy, which Peel Hunt is predicting to be a success.
Analyst Stuart Duncan retained his ‘add’ recommendation but increased the target price from 320p to 345p after interim results showed profits up 14% to £32.4 million and total net inflows of £600 million.
‘Although overall results were largely as expected, the highlight of the first half has been the organic growth rate of 7.6%, with record gross inflows generated,’ he said.
‘This confirms the change in emphasis towards growth, and the success of the strategy to enhance distribution.’
He added: ‘The stock now trades on a December 2017 enterprise value/ profits multiple of 15.1x, which like the rest of the sector has expanded over recent months – the multiple stood at c.13.5x back in January.’
The shares were trading down 0.8%, or 2p, at 327p at the time of writing.
| Key stats | |
|---|---|
| Market capitalisation | £364m |
| No. of shares out | 124m |
| No. of shares floating | 115m |
| No. of common shareholders | not stated |
| No. of employees | 17500 |
| Trading volume (10 day avg.) | m |
| Turnover | £1,147m |
| Profit before tax | £61m |
| Earnings per share | 47.36p |
| Cashflow per share | 59.85p |
| Cash per share | 21.25p |
Liberum: positive momentum at Wincanton
Logistics specialist Wincanton (WIN) has posted full-year results slightly ahead of expectations and Liberum believes the positive momentum will continue.
Analyst Gerald Khoo retained his ‘buy’ recommendation and target price of 290p on the stock after the company posted year-on-year profit growth of 18%.
The shares were trading up 4.3%, or 12p, at 286p at the time of writing.
‘Encouraging results, slightly ahead of expectations, supported by contract renewals and new business wins,’ he said.
‘Profit growth rates were flattered by a weak comparative impacted by loss-making Pullman contracts that ended last year, but we believe there was good underlying progress in all areas. We expect more of the same in the new full year, supported by a steady stream of new business wins.’
Khoo added that despite the strong performance the valuation was still ‘attractive’.