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The Expert View: AstraZeneca, Whitbread and Ashmore

Our daily roundup of analyst commentary on shares, also including Restaurant Group and MJ Gleeson.

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To see all the slides on the same page, click here.

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Key stats
Dividend yield 3.5%
Market capitalisation £77,914m
No. of shares out 1,267m
No. of shares floating 1,262m
No. of employees 61,100
Trading volume (10 day avg.) 1.7m
Turnover 17,428m USD
Profit before tax 5,242m USD
Earnings per share 1.86 USD
Cashflow per share 3.28 USD
Cash per share 2.79 USD

AstraZeneca has turned a corner, says Hargreaves

AstraZeneca (AZN) had been ‘eating itself’ to pay its dividend but has now turned a corner and still has a successful pipeline of drugs to come, says Hargreaves Lansdown.

Full-year product sales rose 4% to $21 billion although less income from disposals meant total revenues fell 2%.

Analyst Nicholas Hyett said 2018 was the year the pharmaceutical giant ‘turned the corner - despite the fairly ugly drop in profits’.

‘In recent years Astra’s been slowly eating itself to keep the dividend going, while it waits for the pipeline to deliver,’ he said.

It is now reaping the rewards of its patience and ‘even after recent successes the pipeline of new drugs looks rich’, Hyatt added.

‘Meanwhile rolling more mature drugs into emerging markets also seems to be delivering results. Admittedly that’s been driven largely by growth in China, which has proven a volatile market of late, but a newly wealthy middle class is unlikely to see drugs as a luxury that can be picked up and dropped like an iPhone.’

The shares surged 7.9% to £61.75 yesterday.

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Key stats
Dividend yield 8.7%
Market capitalisation £639m
No. of shares out 492m
No. of shares floating 490m
No. of employees 14,799
Trading volume (10 day avg.) 0.5m
Turnover £679m
Profit before tax £95m
Earnings per share 11.95p
Cashflow per share 25.20p
Cash per share 3.49p

Restaurant Group takes another blow

Restaurant Group (RTN) shareholders have been dealt a devastating blow, as the chief   executive steps down at a crucial point in its recovery story, says AJ Bell.

Andy McCue, boss of the group which owns Frankie & Benny’s, has stepped down for personal reasons.

Analyst Russ Mould said losing McCue ‘at such a crucial point in its recovery story is devastating for shareholders who have already gone through hell over the past few years’.

He said the news would ‘rock the ship once more’ and ‘there is a risk, or an opportunity, depending on how you view it, that McCue’s replacement will want to tear up the recovery plan and make some more radical changes’.

The shares fell 10.8% to 130.2p yesterday.

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Key stats
Dividend yield 2.1%
Market capitalisation £8,967m
No. of shares out 181m
No. of shares floating 175m
No. of employees 52,705
Trading volume (10 day avg.) 0.5m
Turnover £2,007m
Profit before tax £691m
Earnings per share 188.37p
Cashflow per share 312.99p
Cash per share 49.37p

Impressive market opportunities at Whitbread, says Numis

Premier Inn owner Whitbread (WTB) is scaling an ‘impressive’ market opportunity, says Numis, but there are still some questions to answer.

Analyst Tim Barrett retained his ‘add’ recommendation and target price of £54 on the shares, which were trading at £49.40 yesterday.

He said the recent company update was ‘a good showcase for Whitbread’s operational capabilities and impressive scaling of the ongoing market opportunities’.

‘Unanswered questions include releasing value from real estate - particularly pub restaurants - while the capital return of £2.5 billion is slightly underwhelming. Nonetheless, supportive of the investment case,’ he said.

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Key stats
Dividend yield 4%
Market capitalisation £2,827m
No. of shares out 713m
No. of shares floating 397m
No. of employees 253
Trading volume (10 day avg.) 0.9m
Turnover £286m
Profit before tax £181m
Earnings per share 21.27p
Cashflow per share 22.27p
Cash per share 96.30p

Shore Capital waiting for weakness to ‘buy’ Ashmore

Specialist emerging market asset manager Ashmore (ASHM) has been resilient in the market turbulence but Shore Capital is still waiting for a weaker period of inflows before turning more positive.

Analyst Paul McGinnis retained his ‘hold’ recommendation and target price of 400p on the stock after in line interims and news the chief executive is reducing his 39% stake in the company to a more ‘appropriate level’. The shares fell 3.4% to 399.2p yesterday.

McGinnis said the shares had been on a strong run and was ‘a lonely member of a club of asset managers whose share price is higher now than it was before the sharp market falls seen in the fourth quarter’.

‘The quality operator won’t quite drop to a level at which we feel we can adopt a more positive recommendation,’ he said.

‘We had speculated that such a “buy” opportunity may present itself if flows had turned negative on the back of negative emerging market sentiment. However, clients didn’t panic and were rewarded with a much more resilient asset class than global equities in late 2018, even though Ashmore’s own short-term relative performance versus benchmark was a little weaker.’

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Key stats
Dividend yield 4.3%
Market capitalisation £426m
No. of shares out 55m
No. of shares floating 40m
No. of employees 509
Trading volume (10 day avg.) 0m
Turnover £197m
Profit before tax £38m
Earnings per share 55.15p
Cashflow per share 56.91p
Cash per share 75.68p

No signs of Brexit slowdown at MJ Gleeson

House builder MJ Gleeson (GLEG) is showing no signs of a Brexit-related slowdown, says Peel Hunt.

Analyst Alex Stout retained his ‘hold’ recommendation and increased the target price from 630p to 715p. The shares rose 5.3% to 780p yesterday.

He said interim results were ‘good’, with revenue up 53% to £118 million and profits up 63% to £22 million.

‘The strategic land division performed well, with operating profit up... while the housing division continues to buck the trend, with no signs of a reduction in sales rates,’ he said.

‘Overall we make no changes to group profit forecasts. The shares are currently trading on a current year price/net asset value of 1.85 times versus the sector 1.54 times, with a dividend yield of 4.9%.’

He added that ‘while we like the defensive qualities of the business, we think the current valuation looks full’.

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