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The Expert View: Whitbread, GVC and Experian

Our daily roundup of analyst commentary on shares, also including Associated British Foods and 4imprint.

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

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Key stats
Dividend yield 2.2%
Market capitalisation £8,625m
No. of shares out 184m
No. of shares floating 179m
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

Challenges remain at Whitbread, says Interactive Investor

Following the sale of Costa, Whitbread (WTB) can now focus on Premier Inn but there are some challenges for the business, says Interactive Investor.

The Costa sale to Coca-Cola has been completed ahead of schedule, with a £500 million share buyback announced, though it remains to be seen how all the proceeds will be distributed.

This is good news for shareholders but there are challenges ‘which need to be managed carefully’, said analyst Richard Hunter.

This includes weakness in the regional hotel market outside London and ‘management distraction’ by the Costa sale.

‘The company’s outlook is understandably cautious given the potentially parlous state of the UK economy post-Brexit,’ said Hunter.

The latest update from the company brought ‘initial disappointment’ but ‘hopes will be high for the impending strategy day in February, while the market consensus for the shares has also recently ticked up to a “buy”.’

The shares were flat at £47.77 yesterday.

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Key stats
Dividend yield 4.7%
Market capitalisation £3,987m
No. of shares out 582m
No. of shares floating 563m
No. of employees 2,657
Trading volume (10 day avg.) 2.8m
Turnover 795m EUR
Profit before tax 199m EUR
Earnings per share -0.07 EUR
Cashflow per share 0.38 EUR
Cash per share 0.80 EUR

Shore Capital: GVC best place for new betting rules

This year will be tough for the betting industry as fixed odds betting terminal (FOBT) stakes are cut but GVC (GVC) is better placed than most, says Shore Capital.

Analyst Greg Johnson retained his ‘buy’ recommendation and ‘fair value’ of £12 on the shares, which rose 2.1% to 687p yesterday.

‘2019 is set to be a difficult year for the betting industry. However, given its scale, momentum, geographic reach and synergies still to be garnered from the Ladbrokes Coral deal, GVC is better placed than most,’ he said.

He added that digital gaming revenue would help offset the ‘regulatory drag’ from FOBT rules.

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Key stats
Dividend yield 1.9%
Market capitalisation £17,359m
No. of shares out 910m
No. of shares floating 904m
No. of employees 16,500
Trading volume (10 day avg.) 1.7m
Turnover 3,619m USD
Profit before tax 1,249m USD
Earnings per share 0.61 USD
Cashflow per share 0.98 USD
Cash per share 0.14 USD

Experian in charge of its destiny, says Hargreaves

Experian (EXPN) has reported strong growth in the third quarter and Hargreaves Lansdown says there are few businesses offering exposure to ‘digital transformation’ like the credit rating group.

The group reported 9% underlying organic growth, driven by expansion in the US, although a strong showing in Latin America and the UK was masked by currency movements.

Steve Clayton, manager of the HL Select UK Growth Shares fund, which holds Experian, said a strong US economy meant Experian was ‘enjoying buoyant demand’

‘As more and more commerce moves online, businesses need better and better data to help them market themselves more effectively, putting Experian in a sweet spot,’ he said.

‘Few businesses offer such exposure to the digital transformation underway in economies globally, and especially in the US which is the largest and most attractive marketplace of all. The business is highly cash generative and robustly financed, leaving it firmly in charge of its own destiny.’

The shares rose 1.8% to £19.08 yesterday.

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Key stats
Dividend yield 2.1%
Market capitalisation £18,359m
No. of shares out 792m
No. of shares floating 345m
No. of employees 137,014
Trading volume (10 day avg.) 1.1m
Turnover £15,574m
Profit before tax £1,860m
Earnings per share 127.47p
Cashflow per share 202.03p
Cash per share 175.83p

Associated British Foods fears overdone, says Jefferies

Signs point to investor fears of a rebasing of earnings at Associated British Foods (ABF), warns Jefferies.

Analyst James Grzinic retained his ‘buy’ recommendation and target price of £28 on the shares, which jumped 7% to £23.30 yesterday.

‘A price/earnings at the low end of history, trough 2018/19 sugar earnings, and peak net cash balances suggest investors are fearing an earnings rebasing to come at ABF,’ he said.

But he argued yesterday’s update showed those fears were ‘overdone’ and ‘encouragingly, Primark continues to add ample market share in the UK, and to trade strongly in markets which represent the core of its growth opportunity over the next five years’.

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Key stats
Dividend yield 3.6%
Market capitalisation £556m
No. of shares out 28m
No. of shares floating 27m
No. of employees 912
Trading volume (10 day avg.) 0m
Turnover 488m USD
Profit before tax 35m USD
Earnings per share 0.80 USD
Cashflow per share 0.87 USD
Cash per share 0.85 USD

4imprint valuation justified, says Liberum

The valuation of gifts printer 4imprint (FOUR) is justified by its strong growth and buoyant market conditions, says Liberum.

Analyst Joe Brent retained his ‘buy’ recommendation and target price of £22 on the shares after underlying sales growth accelerated to 18% in the second half of 2018.

‘Market conditions remain buoyant and promotional product distributors reported increased sales in the third quarter of 2018,’ he said.

‘The US economy is currently performing strongly, although US recession is always a risk. The government shutdown is having an impact on some distributors, but limited material impact at 4imprint.’

Although Brent said protectionism was a ‘medium term risk’ affecting 25% of product lines, the valuation was ‘justified by strong growth’.

 The shares jumped 7.6% to £19.95 yesterday.

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