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The Expert View: M&S, Thomas Cook and British Land

Our daily roundup of analyst commentary on shares, also including BGEO and Allergy Therapeutics.

by Michelle McGagh on May 22, 2018 at 05:00

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Key stats
Market capitalisation£4,886m
No. of shares out1,625m
No. of shares floating1,601m
No. of common shareholdersnot stated
No. of employees85209
Trading volume (10 day avg.)7m
Turnover£10,622m
Profit before tax£1,269m
Earnings per share7.18p
Cashflow per share42.54p
Cash per share29.73p

Jefferies: recovery momentum at M&S

Shares in Marks & Spencer (MKS) have started to recover and Jefferies believes the strategy at the high street stalwart will ensure it continues.

Analyst Niraj Amin retained his ‘buy’ recommendation and target price of 370p on the shares, which rose 3% to 300.4p yesterday.

‘A challenging end to M&S full year 2018 is already widely anticipated, so we expect the focus at M&S full-year results to be on strategic progress and the cost of achieving these goals,’ he said.

‘The shares have recovered c.10% over the past week to 9.8x price/earnings ratio and we seek further tangible progress on the strategy and financial comfort to build out conviction.’

However, risks remains from a ‘UK consumer slowdown, execution risk during the shift in space from clothing to food, inflation, [and] rebasing food gross margin’.

Key stats
Market capitalisation£1,926m
No. of shares out1,536m
No. of shares floating1,340m
No. of common shareholdersnot stated
No. of employees21788
Trading volume (10 day avg.)7m
Turnover£9,007m
Profit before tax£588m
Earnings per share0.85p
Cashflow per share15.82p
Cash per share91.61p

Thomas Cook price rise ‘unjustified’, says Berenberg

The market has been backing Thomas Cook (TCG) but Berenberg said there is little justification for the rises when the travel group’s strategy is taken into account.

Analyst Stuart Gordon retained his ‘sell’ recommendation and target price of 100p on the shares, which fell 3% to 125.1p yesterday.

‘Thomas Cook’s shares have performed strongly so far in 2018, we believe with little justification,’ he said.

‘While we acknowledge that management is taking the appropriate steps to address the structural issues faced by the company, there still seems little evidence that this will translate into a material improvement in the financial performance.’

Although the company has made an £84 million improvement in its debt, Gordon said ‘the reality is debt is £92 million higher than it was last year’.

Key stats
Market capitalisation£6,812m
No. of shares out983m
No. of shares floating977m
No. of common shareholdersnot stated
No. of employees650
Trading volume (10 day avg.)3m
Turnover£639m
Profit before tax£452m
Earnings per share49.85p
Cashflow per share51.77p
Cash per share10.69p

British Land: actively enhancing returns, says Liberum

Property development trust British Land (BLND) has delivered some of the strongest sector returns as it shifts its strategy, says Liberum.

Analyst David Brockton retained his ‘hold’ recommendation and target price of 725p on the stock after full-year results. The shares were flat at 692.8p yesterday.

‘Comparing the majors, British Land posted the strongest relative returns to March 2018 and its more decisive shift in strategy towards build-to-rent and flexible workspace has reinforced its current halo as the major that is actively trying to enhance returns,’ he said.

Comparing British Land with Land Securities, Brockton said ‘the actual economic differences between the two businesses are not as marked as the full-year 2018 figures or investor sentiment implies’.

BGEO demerger not unattractive, says Peel Hunt

BGEO (BGEO) shareholders will receive Bank of Georgia shares as the latter spins out of the main group, which is not an unattractive deal, says Peel Hunt.

Analyst Anthony Da Costa retained his ‘add’ recommendation and target price of £40 on BGEO as Bank of Georgia plans to demerge. The Bank of Georgia delivered a ‘solid set’ of first quarter results, with profits up 19% year-on-year.

‘BGEO shareholders receive Bank of Georgia shares one-for-one… with the shares trading on 1.4x 2018 net asset value, for a return on equity of c.20%, we maintain our “add” recommendation,’ he said.

On Da Costa’s estimates the banking arm, including the new investment business, ‘trades on 7.8x 2018 earnings…which is not unattractive’.

BGEO shares fell 2.5% to £32.91 yesterday.

Key stats
Market capitalisation£159m
No. of shares out594m
No. of shares floating196m
No. of common shareholdersnot stated
No. of employees506
Trading volume (10 day avg.)m
Turnover£64m
Profit before tax£m
Earnings per share-0.42p
Cashflow per share-0.09p
Cash per share3.72p

Allergy Therapeutics’ injectables focus to pay dividends, says Numis

Allergy Therapeutics’ (AGY) focus on ‘convenient injections’ to treat allergies should pay dividends over the long term, says Numis.

Analyst Paul Cuddon retained his ‘buy’ recommendation and target price of 45p on the shares, which jumped 6.4% to 26.1p yesterday.

‘Allergy Therapeutics is the only company to have been putting material investment into more convenient injections that are preferred by physicians in the largest markets in the world,’ he said.

‘We expect this to pay dividends longer term given the improved patient adherence and clinical results with [dust mite and grass allergy treatments], and the likelihood that a large number of competitor products will be taken off the market given the heightened standards.’

He added that expanding into the US market ‘remains a priority’.

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Look up the shares

  • Allergy Therapeutics PLC (AGY.L)
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  • BGEO Group PLC (BGEO.L)
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  • British Land Company PLC (BLND.L)
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  • Marks and Spencer Group PLC (MKS.L)
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  • Thomas Cook Group plc (TCG.L)
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