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The Expert View: Go-Ahead, Unilever and Britvic
Our daily roundup of analyst commentary on shares, also including Moneysupermarket and Sky.
by Michelle McGagh on Apr 21, 2017 at 05:00
Value not priced in at Go-Ahead, says Jefferies
There is ‘compelling value’ at bus and rail company Go-Ahead (GOG) as the current share price is not factoring in a worst case scenario, says Jefferies.
Analyst Joe Spooner retained his ‘buy’ recommendation and target price of £25 following third quarter results, despite the group being hit by persistent strikes in its Southern franchise, which is owned by Go-Ahead’s Govia Thameslink Railway (GTR) subsidiary.
‘That Go-Ahead is trading in-line with management hopes and group full year expectations for both bus and rail units are unchanged, should swing focus to valuation,’ said Spooner.
‘We think the current share price reflects a scenario worse than both GTR failing and Go-Ahead winning no more rail franchises. We also think the 5.5% dividend yield is paid from bus free cashflow, further signalling value here.’
The shares were trading up 5.3%, or 92p, at £18.21 at the time of writing.
Growth going flat: Berenberg downgrades Britvic
Berenberg has downgraded drinks maker Britvic (BVIC) after share price rises but little scope for further outperformance.
Analyst Ned Hammond downgraded his recommendation from ‘buy’ to ‘hold’ with a target price of 725p. The shares were trading down 1.3%, or 9p, at 662p at the time of writing.
‘Since the start of 2017, Britvic shares have risen c.20% despite little change to earnings estimates,’ he said.
‘The company had a good start to the year, with a decent first quarter trading update, but simply reiterated that full-year results would be in line with expectations. Although we think that risk could be slightly skewed to the upside if trends from the first quarter continue, we do not believe that there are sufficient catalysts to drive significant outperformance.’
Hammond said the shares looked close to ‘fair value given its relatively weak near-term growth profile’.
Moneysupermarket share weakness is a buy, says Numis
Moneysupermarket (MONY) may have seen growth slide a little in the first quarter but Numis believes the comparison site still provides a long term opportunity.
Analyst Gareth Davies retained his ‘add’ recommendation and target price of 390p on the stock, which was trading up 1.5%, or 5p, at 338p at the time of writing.
‘As expected first quarter trading a little softer at +2% than the strong double digit growth achieved in the second half of 2016,’ he said.
‘Two key drivers of the lower growth: no collective energy switch in the first quarter [and] an exceptional level of current account deals in the first quarter of 2016 that were not offered in 2017.’
Despite the lower growth, Davies said Numis were ‘firm believers in the long term opportunity for Moneysupermarket’ and ‘we would be buyers into any short term weakness in the shares’.
Sky: green shoots of recovery will show, says Hargreaves Lansdown
Growth has slowed at Sky (SKYB) due to expensive football rights in third quarter results Hargreaves Lansdown said were ‘a bit of a side show’ ahead of the broadcaster’s takeover by 21st Century Fox.
Third quarter revenues were up 5% overall, compared to 6% in the first six months and 7% in the first quarter, while operating profits fell 11% to £1 billion as efficiency savings failed to offset the increased cost of Premier League football rights.
The shares were trading flat at 982p at the time of writing.
Analyst Nicholas Hyett said ‘the numbers represent a little bit of a wobble’, pointing to slowing growth, a ‘far from rosy’ advertising outlook and a £494 million jump in the cost of football rights so far this year.
‘A lot of this was expected however, and there are certainly positives,’ he said, pointing to Italy and Germany.
‘Once the group has folded into the Fox giant though, these green shoots of longer term future growth will be little more than a footnote in the credits.’
Unilever on course to meet targets
Unilever (ULVR) has beaten expectations with its first quarter results and Shore Capital expects the consumer goods giant to achieve its targets for the year.
Analyst Darren Shirley reiterated his ‘buy’ recommendation on the company, which has pledged faster growth and boosted dividends after a strategic review in the wake of the failed Kraft Heinz bid.
The shares were trading up 1.5%, or 60p, at £39.98 at the time of writing.
The results confirmed ‘trading comfortably ahead of relatively modest expectations’, with underlying sales growth of 2.9% and a 12% increase in the quarterly dividend. Shirley said the group ‘looks well set to achieve its 3-5% underlying sales growth target for the year’.
There was ‘robust performance’ across personal care, home care, and refreshment. However, food - which includes the spreads division - ‘remain subdued’.
‘However, with the disposal/spin-off of spreads confirmed on 6 April, Unilever have helpfully disclosed that ex spreads, the group underlying sales growth would have been 3.4%, with the food sales ahead by 1.7%... the drag on sales growth from spreads is easily seen in these figures,’ he said.
Shirley said with an enterprise value/earnings multiple of c.15x and a dividend yield of 3% ‘we remain positive on Unilever’s stock’.
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Look up the shares
- Go-Ahead Group PLC (GOG.L)
- Moneysupermarket.Com Group PLC (MONY.L)
- Sky PLC (SKYB.L)
- Britvic PLC (BVIC.L)
- Unilever PLC (ULVR.L)