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The Expert View: Royal Mail, Rio Tinto & Galliford Try

Our daily roundup of analyst commentary on shares, including NCC and AO.

Key stats
Market capitalisation£0m
No. of shares out1,000m
No. of shares floating996m
No. of common shareholdersnot stated
No. of employees159,117
Trading volume (10 day avg.)3m
Turnover£10,172m
Profit before tax£1,019m
Earnings per share25.75p
Cashflow per share59.55p
Cash per share60.00p

Data rules dog Royal Mail, says Hargreaves

New GDPR rules around use of data and communication are reducing the amount of direct mailings, which is bad news for Royal Mail (RMG), says Hargreaves Lansdown.

The company reported a first quarter revenue rise of 2% as the international parcel business offset weakness in the UK.

Analyst Nicholas Hyett said Royal Mail chief executive Rico Back may be one person hoping for an election this year as it would help UK letter revenues.

‘The letters business isn’t being helped by tough new penalties around data protection, introduced under GDPR, which are making marketers nervous about direct mailings,’ he said.

‘Changes in the mix of UK parcels means revenue isn’t keeping pace with volume growth, but that’s not the end of the world so long as margins aren’t being trashed.’

Hyett added that Royal Mail numbers are ‘reasonable’ but ‘with cost cutting a major focus…it’s difficult to get too excited without some indication of what’s happening to margins’.

The shares were trading up 1.9%, or 9p, at 490p.

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Key stats
Market capitalisation£0m
No. of shares out1,000m
No. of shares floating996m
No. of common shareholdersnot stated
No. of employees159,117
Trading volume (10 day avg.)3m
Turnover£10,172m
Profit before tax£1,019m
Earnings per share25.75p
Cashflow per share59.55p
Cash per share60.00p

Data rules dog Royal Mail, says Hargreaves

New GDPR rules around use of data and communication are reducing the amount of direct mailings, which is bad news for Royal Mail (RMG), says Hargreaves Lansdown.

The company reported a first quarter revenue rise of 2% as the international parcel business offset weakness in the UK.

Analyst Nicholas Hyett said Royal Mail chief executive Rico Back may be one person hoping for an election this year as it would help UK letter revenues.

‘The letters business isn’t being helped by tough new penalties around data protection, introduced under GDPR, which are making marketers nervous about direct mailings,’ he said.

‘Changes in the mix of UK parcels means revenue isn’t keeping pace with volume growth, but that’s not the end of the world so long as margins aren’t being trashed.’

Hyett added that Royal Mail numbers are ‘reasonable’ but ‘with cost cutting a major focus…it’s difficult to get too excited without some indication of what’s happening to margins’.

The shares were trading up 1.9%, or 9p, at 490p.

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Key stats
Market capitalisation£0m
No. of shares out1,000m
No. of shares floating996m
No. of common shareholdersnot stated
No. of employees159,117
Trading volume (10 day avg.)3m
Turnover£10,172m
Profit before tax£1,019m
Earnings per share25.75p
Cashflow per share59.55p
Cash per share60.00p

Data rules dog Royal Mail, says Hargreaves

New GDPR rules around use of data and communication are reducing the amount of direct mailings, which is bad news for Royal Mail (RMG), says Hargreaves Lansdown.

The company reported a first quarter revenue rise of 2% as the international parcel business offset weakness in the UK.

Analyst Nicholas Hyett said Royal Mail chief executive Rico Back may be one person hoping for an election this year as it would help UK letter revenues.

‘The letters business isn’t being helped by tough new penalties around data protection, introduced under GDPR, which are making marketers nervous about direct mailings,’ he said.

‘Changes in the mix of UK parcels means revenue isn’t keeping pace with volume growth, but that’s not the end of the world so long as margins aren’t being trashed.’

Hyett added that Royal Mail numbers are ‘reasonable’ but ‘with cost cutting a major focus…it’s difficult to get too excited without some indication of what’s happening to margins’.

The shares were trading up 1.9%, or 9p, at 490p.

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Key stats
Market capitalisation£0m
No. of shares out1,000m
No. of shares floating996m
No. of common shareholdersnot stated
No. of employees159,117
Trading volume (10 day avg.)3m
Turnover£10,172m
Profit before tax£1,019m
Earnings per share25.75p
Cashflow per share59.55p
Cash per share60.00p

Data rules dog Royal Mail, says Hargreaves

New GDPR rules around use of data and communication are reducing the amount of direct mailings, which is bad news for Royal Mail (RMG), says Hargreaves Lansdown.

The company reported a first quarter revenue rise of 2% as the international parcel business offset weakness in the UK.

Analyst Nicholas Hyett said Royal Mail chief executive Rico Back may be one person hoping for an election this year as it would help UK letter revenues.

‘The letters business isn’t being helped by tough new penalties around data protection, introduced under GDPR, which are making marketers nervous about direct mailings,’ he said.

‘Changes in the mix of UK parcels means revenue isn’t keeping pace with volume growth, but that’s not the end of the world so long as margins aren’t being trashed.’

Hyett added that Royal Mail numbers are ‘reasonable’ but ‘with cost cutting a major focus…it’s difficult to get too excited without some indication of what’s happening to margins’.

The shares were trading up 1.9%, or 9p, at 490p.

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Please sign in or register to comment. It is free to register and only takes a minute or two.
Key stats
Market capitalisation£0m
No. of shares out1,000m
No. of shares floating996m
No. of common shareholdersnot stated
No. of employees159,117
Trading volume (10 day avg.)3m
Turnover£10,172m
Profit before tax£1,019m
Earnings per share25.75p
Cashflow per share59.55p
Cash per share60.00p

Data rules dog Royal Mail, says Hargreaves

New GDPR rules around use of data and communication are reducing the amount of direct mailings, which is bad news for Royal Mail (RMG), says Hargreaves Lansdown.

The company reported a first quarter revenue rise of 2% as the international parcel business offset weakness in the UK.

Analyst Nicholas Hyett said Royal Mail chief executive Rico Back may be one person hoping for an election this year as it would help UK letter revenues.

‘The letters business isn’t being helped by tough new penalties around data protection, introduced under GDPR, which are making marketers nervous about direct mailings,’ he said.

‘Changes in the mix of UK parcels means revenue isn’t keeping pace with volume growth, but that’s not the end of the world so long as margins aren’t being trashed.’

Hyett added that Royal Mail numbers are ‘reasonable’ but ‘with cost cutting a major focus…it’s difficult to get too excited without some indication of what’s happening to margins’.

The shares were trading up 1.9%, or 9p, at 490p.

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Key stats
Market capitalisation£70,408m
No. of shares out1,726m
No. of shares floating1,128m
No. of common shareholdersnot stated
No. of employees46,807
Trading volume (10 day avg.)4m
Turnover£30,252m USD
Profit before tax13,562m USD
Earnings per share3.86 USD
Cashflow per share5.74 USD
Cash per share5.00 USD

Buyback hopes rise at Rio, says Jefferies

Rio Tinto (RIO) is hitting production targets but Jefferies says the main focus for the miner is capital returns as growth in this market is too risky.

Analyst Christopher LaFemina reiterated his ‘buy’ recommendation on the stock after a second quarter production report where there were ‘no major surprises’.

Iron ore production was in line with consensus and Rio is now guiding to the upper end of its sales volume guidance range. Bauxite production was better than expected, although copper, aluminium, and coking coal were lower.

LaFemina said ‘capital returns are the focus for now as the outlook is too risky for aggressive growth’.

‘Rio is likely to receive $3.5 billion from the sale of its interest in Grasberg. What will it do with this cash?’ he said.

‘In 2017 Rio declared $5.2 billion of dividends and $4.5 billion of share repurchases…We expect more of the same in 2018 – look for another $1-2 billion buyback announcement with the half-year results – as Rio is unlikely to pull the trigger on large scale M&A until next year at the soonest.’

The shares were trading up 1.3%, or 55p, at £40.59.

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Key stats
Market capitalisation£953m
No. of shares out111m
No. of shares floating108m
No. of common shareholders4,572
No. of employees5,506
Trading volume (10 day avg.)0.4m
Turnover£2,705m
Profit before tax£152m
Earnings per share52.86p
Cashflow per share60.02p
Cash per share1,243.82p

Liberum: extreme value in Galliford Try

Liberum sees ‘significant’ upside in undervalued Galliford Try (GFRD) where balance sheet concerns have been reduced and margins are increasing.

Analyst Charlie Campbell retained his ‘buy recommendation but reduced the target price from £11.16 to £10.77 on the stock, which was trading up 2.8%, or 23p, at 857p.

‘We see significant upside in Galliford Try’s shares…The imminent completion of the Aberdeen bypass should mean that attention moves away from the small construction dividend to the much large Linden Homes division, where new management is succeeding in raising margins through self-improvement measure, and the rapidly growing partnership and regeneration division,’ he said.

‘The recent £150 million rights issue has settled fears over the balance sheet.’

He added that there was ‘extreme value’ in the shares, which trade under six times forecast earnings and yield 9%. With a 12 months forward price-to-book multiple of 1.4 ‘despite earnings over 25% return on equity this year’.

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Key stats
Market capitalisation£618m
No. of shares out278m
No. of shares floating269m
No. of common shareholdersnot stated
No. of employees1,388
Trading volume (10 day avg.)0.2m
Turnover£245m
Profit before tax£35m
Earnings per share-20.49p
Cashflow per share-13.61p
Cash per share4.45p

NCC just starting its growth story, says Peel Hunt

NCC (NCC) has delivered ‘solid’ full-year results but the cyber security firm is only at the start of a ‘multi-year’ growth story.

Analyst Damindu Jayaweera retained his ‘buy’ recommendation and target price of 275p on the stock, which was trading up 6%, or 4.8p, at 84p on Tuesday.

It reported earnings 8% ahead of Jayaweera’s expectations and ‘strong double-digit organic growth across key assurance divisions’.

‘Free cashflow, coming in at £20 million, reflected significant operational improvements made by the current team…With financials now stabilised, NCC looks to build on these assets. For example, organic expansion via small offices is a viable strategy until such time when M&A will make sense.’

Jayaweera said the share valuation is supportive and a ‘solid track record in recent months and a chief executive with a vision’ means ‘NCC is still only at the beginning of a multi-year secular growth story’.

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Key stats
Market capitalisation£688m
No. of shares out459m
No. of shares floating213m
No. of common shareholdersnot stated
No. of employees2,771
Trading volume (10 day avg.)0.3m
Turnover£797m
Profit before tax£-7m
Earnings per share-2.92p
Cashflow per share-1.24p
Cash per share12.21p

Shore Capital: scale and valuation concerns at AO

Online white goods retailer AO (AO) remains sub-scale in Europe and the valuation is ‘more than up’ with events, says Shore Capital.

Analyst Greg Lawless reiterated his ‘sell’ recommendation on the stock, which was trading down 0.5%, or 0.8p, at 149p on Tuesday ahead of its quarterly update.

‘In terms of valuation, AO trades on a forward one-year enterprise value/EBITDA multiple of 182 times and on a 2020 multiple of 33 times,’ he said.

‘The company continues to work towards achieving a profitable run-rate during full-year 2021 for the European operation. Given our concerns about the scale of the losses across the European footprint, where the business remains sub-scale for the foreseeable future, we continue to believe that the current valuation is more than up with events.’

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