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The Expert View: St James’s Place, Spire and HSS

Our daily roundup of analyst commentary on shares, also including Dialight and Tesco.

by Michelle McGagh on Mar 06, 2018 at 05:00

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Key stats
Market capitalisation£5,930m
No. of shares out529m
No. of shares floating493m
No. of common shareholdersnot stated
No. of employees1735
Trading volume (10 day avg.)1m
Turnover£9,083m
Profit before tax£351m
Earnings per share27.37p
Cashflow per share28.93p
Cash per share1,376.09p

St James’s Place: good growth at a reasonable price, says Numis

Shares in St James’s Place (SJP) are offering ‘good growth’ at a ‘reasonable’ price, according to Numis.

Analyst David McCann retained his ‘buy’ recommendation and increased the target price from £14.30 to £14.95 after updating his forecasts following full-year results. The shares were up 1.3% at £11.23 yesterday.

‘We continue to hold SJP in very high regard and believe it should continue to be a core long-term sector holding for many investors,’ he said.

‘We believe that the business will continue to demonstrate that it is one of the most consistent and resilient asset gathers, and retainers, regardless of the economic conditions.’

McCann noted the target of 15-20% a year assets growth which will feed through to profits and dividends.

‘In this regard, we view the shares as offering good growth at a reasonable price,’ he said.

Key stats
Market capitalisation£770m
No. of shares out352m
No. of shares floating272m
No. of common shareholdersnot stated
No. of employees4908
Trading volume (10 day avg.)1m
Turnover£311m
Profit before tax£33m
Earnings per share2.68p
Cashflow per share6.04p
Cash per share-9,999,999.00p

Market too pessimistic on Spire, says Jefferies

The new chief executive of Spire Healthcare Group (SPI) is delivering a ‘confident vision’ for the independent hospital group and Jefferies expects further upside.

Analyst James Vane-Tempest retained his ‘buy’ recommendation but reduced his target price from 290p to 275p. The shares fell 1.8% to 219.6p yesterday.

‘2017 was a challenging year but on first impressions, the new chief executive has delivered a bold, fresh and confident vision as well as 2022 targets that we believe also leave room for upside,’ he said.

Vane-Tempest said that concerns over NHS contracts ‘aren’t likely to abate’ but ‘the mix is improving and expectations are low’.

‘We still expect headwinds in 2018 but believe the market is too pessimistic on the rest of the business,’ he said.

Key stats
Market capitalisation£18m
No. of shares out69m
No. of shares floating13m
No. of common shareholdersnot stated
No. of employees21
Trading volume (10 day avg.)m
Turnover£9m
Profit before tax£m
Earnings per share0.72p
Cashflow per share0.73p
Cash per share0.26p

Risks to HSS not factored in, says Liberum

Debt continues to hinder HSS Hire Group (HSS) but the market has not fully discounted the risks associated with the equipment rental company, says Liberum.

Analyst Rahim Karim reiterated his ‘sell’ recommendation and reduced the target price from 30p to 22p after a recent strategy update. The shares were trading at 25.8p yesterday.

‘While the recent strategy update partly addressed a number of pertinent issues, we continue to believe that the level of debt within the business is limiting the group’s flexibility to fully address the issues ahead of it,’ said Karim.

‘Given the lack of yield support, an uninspiring relative valuation and significant execution risk associated with the latest round of cost savings, we don’t believe all of the risks are fully discounted.’

Key stats
Market capitalisation£m
No. of shares out33m
No. of shares floating32m
No. of common shareholdersnot stated
No. of employees1536
Trading volume (10 day avg.)m
Turnover£181m
Profit before tax£14m
Earnings per share5.15p
Cashflow per share18.17p
Cash per share39.36p

Peel Hunt: problems at Dialight are ‘fixable’

Ongoing manufacturing problems with Dialight (DIAL) outsourcing partner Sanmina are not beyond fixing, according to Peel Hunt.

Analyst Andrew Shepherd-Barron retained his ‘hold’ recommendation and increased the target price from 565p to 600p.

He said the next two months would prove whether the partnership with Sanmina was ‘fixable’, although he expects it to take a year for ‘earnings visibility to really improve, which means there is no hurry to own the shares now’. The shares fell 2.8% to 548p yesterday.

‘We continue to be surprised by the slow resolution of the Sanmina situation, meaning that we must be misunderstanding how difficult it is to organise the assembly of LED lights,’ he said.

‘Hopefully, the delaying of its resolution beyond June, and possibly beyond December given chief executive Marty Rupp’s hope to “start to see benefits in the second half”, is precautionary only.’

Shepherd-Barron said the problems with manufacturing were fixable and ‘the US position not too damaged’ by the issues.

Key stats
Market capitalisation£16,692m
No. of shares out8,209m
No. of shares floating7,938m
No. of common shareholdersnot stated
No. of employees133041
Trading volume (10 day avg.)43m
Turnover£55,917m
Profit before tax£2,637m
Earnings per share0.88p
Cashflow per share16.70p
Cash per share83.57p

Shore sticks with Tesco ‘buy’ rating

Shore Capital had not been convinced by the Tesco’s (TSCO) Booker takeover but believes the supermarket can rebuild margins and deliver strong earnings per share.

Analyst Clive Black reiterated his ‘buy’ recommendation after Tesco formerly announced the Booker deal had been completed and Booker chair Charles Wilson would be joining the board as a non-executive director.

‘Shore Capital has not been bowled over by the Booker merger, it has to be said, but we welcome its completion and so the commencement of the job in hand of combining the two entities and extracting targeted synergies,’ said Black.

‘More broadly though, our positive stance on Tesco reflects our well-versed expectations that margins can rebuild and on our current expectations support strong earnings per share growth to 2020 with corresponding rating compression.’

The shares were trading at 203p yesterday.

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  • St. James's Place PLC (SJP.L)
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  • Spire Healthcare Group PLC (SPI.L)
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  • HSS Hire Group PLC (HSS.L)
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  • Dialight PLC (DIAL.L)
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  • Tesco PLC (TSCO.L)
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