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The Expert View: Bovis Homes, Associated British Foods & SIG

Our daily roundup of analyst commentary on shares, including Reckitt Benckiser and GVC Group.

by Michelle McGagh on Jul 07, 2017 at 05:01

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Key stats
Market capitalisation£1,301m
No. of shares out135m
No. of shares floating132m
No. of common shareholdersnot stated
No. of employees1186
Trading volume (10 day avg.)1m
Profit before tax£121m
Earnings per share89.97p
Cashflow per share91.66p
Cash per share28.66p

Bovis shares at ‘attractive’ entry point, says Jefferies

A first half update from Bovis Homes (BVS) shows the housebuilder’s turnaround is on track and shares are at an ‘especially attractive’ entry point, says Jefferies.

Analyst Anthony Codling retained his ‘buy’ recommendation and target price of £11.22 on the stock after the trading statement said operating profits were expected in the range of £42-48 million.

The group was the subject of two failed takeover bids this year following a profits warning. It continues to invest, sales are on track and Codling likes the fact that chief executive Greg Fitzgerald has bought £3.2 million of shares since joining in April.

Codling said the ‘turnaround is on track’ but ‘there is a long way to go’.

‘We expect the valuation gap to close as the group continues to build homes and build confidence,’ he added.

Bovis shares gave up earlier gains to trade 3p higher at 966p yesterday afternoon.

Key stats
Market capitalisation£7,291m
No. of shares out309m
No. of shares floating296m
No. of common shareholdersnot stated
No. of employees4526
Trading volume (10 day avg.)2m
Profit before tax£625m
Earnings per share196.95p
Cashflow per share199.47p
Cash per share295.95p

Hargreaves: ABF sees off currency woes with fast fashion

Primark and Britain’s thirst for cheap fashion is helping Associated British Foods (ABF) to weather currency headwinds, says Hargreaves Lansdown.

Third quarter growth came in slightly ahead of expectations at 13% and revenues increased 10% over the period. Shares rose 3.8% on the news and at the time of writing were trading up 4.7%, or 138p, at £30.60.

Analyst Nicholas Hyett said currency winds ‘may be hitting margins’ but Primark’s ‘disposable fashion at amazing prices remains popular with shoppers across Europe, with sales growth many high street retailers would kill for’.

‘Primark’s North American expansion finally seems to be gathering a head of steam too, with the two new US stores opened this quarter trading particularly well,’ he added.

ABF’s other businesses are more ‘idiosyncratic’ but Hyett expects the sugar division to revive as prices recovery and ‘sweeten results’.

Key stats
Market capitalisation£902m
No. of shares out591m
No. of shares floating547m
No. of common shareholdersnot stated
No. of employees10315
Trading volume (10 day avg.)4m
Profit before tax£-119m
Earnings per share-20.14p
Cashflow per share-13.33p
Cash per share21.76p

SIG bounce means shares fairly valued, says Numis

SIG (SHI) management makes positive noises about fixing underperformance, but Numis Securities believes shares in the specialist construction material supplier are fairly priced.

Analyst Howard Seymour retained a ‘hold’ recommendation but lifted his target price from 96p to 150p with the stock trading 0.2%, or 0.4p, lower at 152p on Thursday afternoon.

He said concerns associated with the second half of last year have ‘lessened’ and that ‘management are making sensible – if early – positive noises about fixing underperformance’.

‘That said, we retain a ‘hold’ recommendation; Europe is looking like it may improve, but uncertainty about the UK market outlook and competitor market share aggression, plus impact of SIG’s strategic moves under previous management could limit recovery potential if realised,’ he said.

After a recent bounce in the share price Seymour said the ‘shares fairly reflect the better risk profile and hope that management can fix underperformance, while still reflecting that the UK backdrop in particular is likely to remain challenging’.

Key stats
Market capitalisation£53,368m
No. of shares out703m
No. of shares floating633m
No. of common shareholdersnot stated
No. of employees34700
Trading volume (10 day avg.)1m
Profit before tax£1,832m
Earnings per share256.48p
Cashflow per share288.81p
Cash per share109.27p

Reckitt’s cyber attack hits sales and growth

Household goods giant Reckitt Benckiser (RB) has cautioned about the impact a recent cyber attack has had on trading and Shore Capital is expecting its shares to trade lower.

Analyst Darren Shirley retained his ‘hold’ recommendation on the stock, which was trading down 1.7%, or 129p, at £75.73 at the time of writing yesterday, after the company said the attack disrupted the group’s ability to manufacture and distribute across multiple markets.

The group is expected to take a 2% hit on sales and growth through the second quarter but a fuller update will be provided at the half-year results.

‘While we are encouraged the margin ‘continues to make satisfactory progress’ we place our forecasts under review for downward revision,’ said Shirley. ‘We retain our 'hold' stance for now though expect the shares to trade lower [on the update].’

Key stats
Market capitalisation£2,304m
No. of shares out301m
No. of shares floating294m
No. of common shareholdersnot stated
No. of employees2682
Trading volume (10 day avg.)1m
Turnover723m EUR
Profit before tax-121m EUR
Earnings per share-0.45 EUR
Cashflow per share-0.01 EUR
Cash per share1.06 EUR

Performance improving at GVC, says Peel Hunt

Online gambling company GVC Holdings (GVC) is buoyed by its business and marketing spending, says Peel Hunt.

Analyst Ivor Jones reiterated his ‘buy’ recommendation and £10 target price on the stock following an ‘in-line’ second quarter trading statement and 18% constant currency growth in gaming revenue in sports brands.

The shares shed 6p, or 0.8%, at the time of writing yesterday.

‘GVC’s performance continues to be buoyed up by extracting synergies and improving the performance of the business,’ he said.

‘It is starting to increase marketing spend in order to accelerate revenue growth. In addition, its exposure to the increasingly baleful influence of the UK Gambling Commission is limited.’

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  • Bovis Homes Group PLC (BVS.L)
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  • Associated British Foods PLC (ABF.L)
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  • Reckitt Benckiser Group PLC (RB.L)
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  • GVC Holdings PLC (GVC.L)
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