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The Expert View: Taylor Wimpey, Ladbrokes Coral and Aggreko

Our daily roundup of analyst commentary on shares, also including Anglo Pacific.

by Michelle McGagh on Nov 14, 2017 at 05:00

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Key stats
Market capitalisation£6,310m
No. of shares out3,272m
No. of shares floating3,249m
No. of common shareholdersnot stated
No. of employees4673
Trading volume (10 day avg.)16m
Profit before tax£767m
Earnings per share17.95p
Cashflow per share18.05p
Cash per share13.77p

Numis upgrades Taylor Wimpey on strong results

Numis has upgraded Taylor Wimpey (TW) on a positive trading update from the housebuilder despite concerns about the new build sector.

Analyst Chris Millington upgraded his recommendation from ‘hold’ to ‘add’ and increased the target price from 215p to 221p after second half trading showed the company is on track to meet full year expectations.

‘Taylor Wimpey’s trading update confirms that sales rates and outlet numbers are in line with expectations, which is reassuring given the updates last week cast some doubles on the strength of the new build sector,’ he said.

He upgraded 2017 and 2018 profit before tax expectations to ‘reflect the positive trading trends’ and also increased the net cash forecast for 2017 from £380 million to £500 million ‘suggesting that the scheduled cash return for 2018 is well underpinned’.

The shares edged half a penny higher to 193.4p yesterday.

Key stats
Market capitalisation£2,558m
No. of shares out1,916m
No. of shares floating1,722m
No. of common shareholdersnot stated
No. of employees26141
Trading volume (10 day avg.)13m
Profit before tax£199m
Earnings per share-17.49p
Cashflow per share-8.34p
Cash per share3.44p

Odds stacked against Ladbrokes Coral, says Hargreaves Lansdown

Ladbrokes Coral (LCL) has more riding on a potential government clampdown on ‘crack cocaine’ fixed odds betting machines than any other bookmaker, says Hargreaves Lansdown.

Third quarter results from the company showed revenues were up 2% driven by strong growth in European and digital divisions, although the UK retail business posted a small decline. The shares fell 2.8% to 133.1p yesterday on the news.

Analyst George Salmon said while the results seemed ‘true to the form book’, dig deeper and ‘one sees that growth at Coral, plus strong performances in Italy and Australia, have masked a weaker showing from’.

‘A better performance here will be needed going forwards,’ he said.

The main problem is with stronger regulation of fixed odds betting terminals is insufficient.

‘These machines, sometimes referred to as the crack cocaine of gambling, are responsible for significant in-shop revenue,’ said Salmon.

‘While we’ll need to wait until the New Year to find out what the new limits and regulations look like, proposals to cut the maximum stake from £100 to just £2 are still in the mix. With over 3,500 shops across the country, Ladbrokes Coral has more riding on the outcome than any other major bookie.’

Key stats
Market capitalisation£2,478m
No. of shares out256m
No. of shares floating236m
No. of common shareholdersnot stated
No. of employees6090
Trading volume (10 day avg.)1m
Profit before tax£563m
Earnings per share49.02p
Cashflow per share160.78p
Cash per share17.18p

‘More optimistic’ Jefferies upgrades Aggreko

Jefferies has upgraded hire firm Aggreko (AGGK) as it finds ‘reasons to be more optimistic’ despite negative earnings momentum over the past five years.

Analyst Will Kirkness upgraded his recommendation from ‘hold’ to ‘buy’ and increased the target price from 850p to £12.50. The shares rose 2.3% to 972.6p yesterday.

‘With [the] power solutions industrial [division] demonstrating strong on-going momentum, the swing factors on group earnings will be the utility business within power solutions and the rental solutions business,’ he said.

‘In both areas, we find reasons to be more optimistic. If the negative earnings momentum experienced over the last five years can be halted, then the shares should continue to react positively.’

He noted that the downside risks include ‘large contract losses, pricing pressure and technological obsolescence’.

Key stats
Market capitalisation£251m
No. of shares out181m
No. of shares floating161m
No. of common shareholdersnot stated
No. of employees9
Trading volume (10 day avg.)m
Profit before tax£16m
Earnings per share15.60p
Cashflow per share17.32p
Cash per share3.14p

Anglo Pacific cash pile could drive rerating, says Peel Hunt

Oil resources business Anglo Pacific (APF) has built up a cash buffer, which Peel Hunt says gives it the capacity to self-fund acquisitions.

Analyst Peter Mallin-Jones retained his ‘buy’ recommendation and increased the target price from 151p to 154p. The shares edged 0.3% higher to 138.4p yesterday.

‘The company’s net cash position of £6.2 million at quarter end is well ahead of where we expected the group to close 2017,’ he said.

He added that looking into 2018 ‘we see a cash surplus of £21 million after dividend payments of £13 million’.

‘Anglo Pacific may not need to issue any shares to complete any future deal,’ said Mallin-Jones. ‘This would make such a deal materially more accretive… it would also demonstrate the company’s ability to self-fund, and help drive a rerating of the shares.’

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  • Ladbrokes Coral Group PLC (LCL.L)
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  • Anglo Pacific Group PLC (APF.L)
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  • Taylor Wimpey PLC (TW.L)
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  • Aggreko PLC (AGGK.L)
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