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The Expert View: Domino’s, Sky and Wincanton

Our daily roundup of analyst commentary on shares, also including Ashmore and Low & Bonar.

by Michelle McGagh on Apr 19, 2017 at 05:00

If you would like to receive news alerts on any of the stocks mentioned in The Expert View, click on the star icons below to add them to your favourites.
Key stats
Market capitalisation£1,586m
No. of shares out492m
No. of shares floating486m
No. of common shareholdersnot stated
No. of employees911
Trading volume (10 day avg.)3m
Turnover£361m
Profit before tax£65m
Earnings per share12.93p
Cashflow per share14.41p
Cash per share4.75p

Buying opportunity at Domino’s, says Numis

Numis believes there is a buying opportunity at Domino’s Pizza (DOM) after a 20% fall in the shares.

Analyst Richard Stuber retained his ‘buy’ recommendation and target price of 510p on the stock after share price falls following preliminary results in March. The shares were trading flat at 326p at the time of writing.

The shares have fallen 20% since the results but Stuber said this correction was not justified.

‘Despite slowing like-for-like sales, we retain confidence in the cash generative, high return on capital employed model,’ he said.

‘We do not expect like-for-like to revert to double-digit growth, but we do expect system sales – the key sign of health – to remain in high single digit in line with the growth for the wider delivery market. We think this share price fall offers an attractive buying opportunity.’

Note: Domino's Pizza implemented a three-for-one share split in June last year.

Key stats
Market capitalisation£2,461m
No. of shares out707m
No. of shares floating388m
No. of common shareholdersnot stated
No. of employees266
Trading volume (10 day avg.)1m
Turnover£212m
Profit before tax£128m
Earnings per share18.08p
Cashflow per share18.93p
Cash per share82.66p

Inflows up at Ashmore but Peel Hunt remains cautious

Specialist emerging markets investment manager Ashmore (ASHM) has returned to positive inflows but Peel Hunt remains cautious as the earnings multiple has changed little.

Analyst Stuart Duncan retained his ‘hold’ recommendation and target price of 330p on the stock following a third quarter trading update. The shares were trading down 1.7%, or 6p, at 357p at the time of writing.

Duncan said the update ‘marks a return to positive inflows, which was expected to some extent after an improving trend over the last two quarters,’ he said.

‘We do not anticipate much change to forecasts, leaving the stock trading on a December 2017 enterprise value/profits [ratio] of 14.4x, slightly higher than the sector average.’

Despite the attraction of a 4.6% yield, Duncan said he maintained his ‘relatively cautious stance, as the multiple is little changed for the following year given the reduction in earnings’.

‘We remain of the view that Ashmore is well placed to capitalise on the long-term trend of increasing allocation to emerging market assets,’ he said.

Key stats
Market capitalisation£262m
No. of shares out329m
No. of shares floating325m
No. of common shareholdersnot stated
No. of employees2163
Trading volume (10 day avg.)m
Turnover£400m
Profit before tax£17m
Earnings per share5.15p
Cashflow per share11.65p
Cash per share7.99p

Low & Bonar share ‘unsustainably cheap’, says Berenberg

Plastics group Low & Bonar (LWB) will need to prove to investors that ‘production interruptions’ are a thing of the past if the ‘unsustainably cheap’ stock is to reach its potential, says Berenberg.

Analyst Ian Osburn retained his ‘buy’ recommendation and target price of 112p on the stock, which was trading down 1.2%, or 1p, at 79.5p at the time of writing.

‘It is clear that management must deliver on its strategic plans for our “buy” case to hold. It is likely that the market will have to become confident that production interruptions are a thing of the past for the stock to reach our price target,’ he said.

‘We are happy with that risk/reward profile and see time to purchase the stock running out ahead of reported results confirming the improvement,’ he added.

‘With new management delivering on its plans, we expect Low & Bonar’s earnings per share growth and dividend yield to be the highest in the sector over the next three years.’

Key stats
Market capitalisation£16,791m
No. of shares out1,719m
No. of shares floating1,006m
No. of common shareholdersnot stated
No. of employees26982
Trading volume (10 day avg.)5m
Turnover£11,965m
Profit before tax£666m
Earnings per share38.70p
Cashflow per share94.60p
Cash per share124.32p

Sky update to reveal headwinds, says Jefferies

Jefferies is expecting the trading statement from Sky (SKY) this week to be ‘limited’ but with enough information to confirm the broadcaster is battling weak consumer spending.

Analyst Jerry Dellis retained his ‘hold’ recommendation and target price of £10.50 on the stock, which was trading flat at 981p at the time of writing.

‘Sky will publish a third quarter 2016/17 trading statement on Thursday,’ he said. ‘Disclosure is likely to be limited as normal but should be sufficient to illustrate headwinds from a weaker consumer environment in the UK and, in Italy, reduced appetite,’ he said.

He said the broadcaster was unlikely to make any comments on the proposed acquisition by 20th Century Fox.

‘Whilst competition clearance from the European Commission was received on 7 April, the more sensitive matters of the UK public interest reviews and Ofcom’s “fit and proper” assessment on Sky are not due to report until 16 May.’

Key stats
Market capitalisation£333m
No. of shares out124m
No. of shares floating115m
No. of common shareholdersnot stated
No. of employees17500
Trading volume (10 day avg.)m
Turnover£1,147m
Profit before tax£61m
Earnings per share47.36p
Cashflow per share59.85p
Cash per share21.25p

The Share Centre: growth and divis offered at Wincanton

Logistics specialist Wincanton (WIN) is The Share Centre’s top pick this week as it believes it has capacity to grow and has a healthy dividend.

Analyst Graham Spooner retained his ‘buy’ recommendation on the stock following its latest trading update. The shares were trading flat at 271p at the time of writing.

He said the company had a number of blue chip customers in defensive sectors which meant ‘revenues should be resilient even if economic growth falters’.

Despite being Britain’s largest logistics provider, Wincanton only has 4% market share ‘so attracted investors should appreciate there is plenty of scope for further growth’.

‘Indeed, there is great potential for more web-based activity, such as online retailers, as well as more growth in sectors such as defence and healthcare,’ he said.

The shares currently trade on a 2018 price/earnings ratio of 9.8x, which Spooner said was ‘good value relative to peers while the prospective dividend yield of 3.7% is also good’.

‘In fact, dividends are more than twice covered by earnings,’ he said.

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Look up the shares

  • Domino's Pizza Group PLC (DOM.L)
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  • Sky PLC (SKYB.L)
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  • Wincanton PLC (WIN.L)
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  • Ashmore Group PLC (ASHM.L)
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  • Low & Bonar PLC (LWB.L)
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