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The Expert View: Burberry, Spire and Beazley

Our daily roundup of fund manager and analyst commentary on shares, also including 4imprint and Ricardo.

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Key stats
Market capitalisation£6,867m
No. of shares out424m
No. of shares floating392m
No. of common shareholdersnot stated
No. of employees9828
Trading volume (10 day avg.)2m
Turnover£2,766m
Profit before tax£637m
Earnings per share64.86p
Cashflow per share99.32p
Cash per share189.48p

Hargreaves: investors need to have faith in upmarket Burberry

Burberry (BRBY) investors will have to trust that new chief executive Marco Gobbetti is able to deliver on his transformation plans, as results are unlikely to be visible in the short term, says Hargreaves Lansdown.

Shares in Burberry fell 8.3% to £16.37 yesterday as the luxury brand reported a 2% fall in retail revenue over the Christmas quarter.

Steve Clayton, manager of the HL Select UK Growth Shares fund, which has a 3.8% position in Burberry, said ‘the investment case is more about the transformation plans that Gobbetti is pushing forward’.

‘They are designed to push the brand in the upper echelons of the luxury sector, where margins are highest and returns more reliable,’ he said. ‘Progress on this front is said to be strong, but with returns unlikely to be visible in the profit and loss account for some time, investors have to take Gobbetti on trust.’

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Key stats
Market capitalisation£884m
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

Jefferies goes against market sentiment to upgrade Spire

Jefferies has upgraded Spire Healthcare (SPI) as it believes concerns over the independent hospital group’s NHS business are overblown.

Analyst James Vane-Tempest upgraded his recommendation from ‘hold’ to ‘buy’ and increased the target price from 259p to 290p. The shares rose 3.1% to 249p yesterday.

‘Ahead of full year preliminary results on 2 March, we expect the market is being overly pessimistic on Spire,’ he said.

‘In our view, market expectations for the NHS segment are at lows and strong delivery on its self-pay segment and improvement on return on invested capital could cause a rerating in 2018.’

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Key stats
Market capitalisation£2,780m
No. of shares out526m
No. of shares floating509m
No. of common shareholdersnot stated
No. of employees1144
Trading volume (10 day avg.)1m
Turnover1,373m USD
Profit before tax512m USD
Earnings per share0.34 USD
Cashflow per share0.35 USD
Cash per share0.52 USD

Beazley results are ‘extraordinary’, says Shore Capital

Specialist insurer Beazley (BEZG) is expecting 2017 pre-tax profits to be ahead of expectations which Shore Capital believes is an ‘extraordinary achievement’ considering the vast losses for the insurance sector after a year of natural disasters.

Analyst Eamonn Flanagan reiterated his ‘buy’ recommendation on the shares, which rose 3.9% to 527.5p yesterday.

‘Given the scale, variety and extent of the insured catastrophe losses in 2017, which are likely to exceed $100 billion across the industry… [it is an] extraordinary achievement,’ he said.

‘It is testament to the underwriting prowess of Beazley, its underwriting discipline and the quality of its specialty book. In addition, we commend Falcon, its part-owned asset manager, for a quite superb investment return in the year.’

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Key stats
Market capitalisation£558m
No. of shares out28m
No. of shares floating26m
No. of common shareholdersnot stated
No. of employees852
Trading volume (10 day avg.)m
Turnover405m USD
Profit before tax29m USD
Earnings per share0.63 USD
Cashflow per share0.69 USD
Cash per share0.56 USD

Peel Hunt downgrades 4imprint after rally

Peel Hunt has downgraded 4imprint (FOUR) after a strong run for the shares.

Analyst Malcolm Morgan downgraded his recommendation from ‘buy’ to ‘add’ with a target price of £20.50 on the shares, which fell 1.5% to £19.50 yesterday.

A treading update showed revenue growth for the second half of the year averaged 14.1%, while the fourth quarter demonstrated ‘robust organic growth’. Full-year revenue was $627.5 million (£455 million), $6 million ahead of his forecast.

‘A year ago the presidential election unsettled the sales pattern and the company has been clear that marketing spend was skewed towards the second half of the year, helping drive growth,’ he said. ‘The market will react well to a strong organic growth rate more consistent with historic trends despite the specific issues supporting the growth in the period.’

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Key stats
Market capitalisation£533m
No. of shares out53m
No. of shares floating52m
No. of common shareholdersnot stated
No. of employees2718
Trading volume (10 day avg.)m
Turnover£352m
Profit before tax£53m
Earnings per share46.44p
Cashflow per share76.97p
Cash per share52.48p

Liberum: Ricardo floors the accelerator

Car design consultant Ricardo (RCDO) has posted ‘impressive’ first half orders and Liberum believes momentum is building.

Analyst Ben Bourne retained his ‘buy’ recommendation and target price of £10.80 on the shares are organic first half order intake increased more than 25%. The shares jumped 5.8% to £10 yesterday.

He said orders relating to hybrid and electric vehicles had been ‘particularly encouraging at around 24% of intake, compared to 17% last year’.

‘Furthermore, strong working capital performance drove net debt down to £32 million even after paying for the Control Point Corporation acquisition,’ he said.

‘Full-year estimates have headroom to improve and there are some exciting opportunities within performance products…the shares currently trade on a current year 2018 price/earnings of 15.6x. Momentum is building.’

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