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The Expert View: JD Sports, Aston Martin and Just Group

Our daily roundup of analyst commentary on shares, also including Miton and Worldpay.

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Key stats
Dividend yield 0.3%
Market capitalisation £4,711m
No. of shares out 973m
No. of shares floating 405m
No. of employees 32,125
Trading volume (10 day avg.) 0.8m
Turnover £3,161m
Profit before tax £380m
Earnings per share 23.83p
Cashflow per share 31.62p
Cash per share 35.71p

Shore Capital: JD bid for Footasylum is ‘sensible’

JD Sports’ (JD) acquisition of Footasylum is a ‘sensible’ acquisition and the former’s infrastructure will benefit the latter, says Shore Capital.

Analyst Greg Lawless retained his ‘buy’ recommendation on the stock after JD Sports offered 82.5p per share to Footasylum investors, representing a 77% premium to Friday’s close price of 46.5p. JD Sports believes the group is a ‘well-established business with a strong reputation’.

‘This looks a sensible bolt-on acquisition in the UK to the JD Sports group, which crystallises the strategic stake that the company acquired back in February in Footasylum,’ said Lawless.

‘It brings a further fascia to the group and by leveraging JD’s infrastructure and sourcing capabilities will be able to drive out operating synergies, which can potentially be reinvested in the offer.’

JD Sports shares rose 3p to 489p yesterday while Footasylum surged 72% to 80p.

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Key stats
Dividend yield 0%
Market capitalisation £5,557m
No. of shares out 506m
No. of shares floating 499m
No. of employees 1,899
Trading volume (10 day avg.) 3.6m
Turnover £2,306m
Profit before tax £775m
Earnings per share 46.60p
Cashflow per share 49.75p
Cash per share 40.85p

Aston Martin outlook ‘muted’, says Jefferies

Markets have already priced in a more ‘muted’ outlook for Aston Martin (AML) shares and Jefferies believes the luxury car maker will have to take on more debt to deal with its problems.

Analyst Philippe Houchois retained his ‘underperform’ recommendation and reduced his target price from £14.00 to £10.50 after full year results ‘were not far from expected levels’ but ‘confirmed worries about weak operating leverage and excessively tight liquidity’.

The shares fell 6% to £10.92 yesterday. ‘Equity markets have already re-priced shares for a more muted margin outlook versus IPO expectations,’ he said.

‘Management still needs to deliver without further mishap but it is largely up to controlling shareholders and the board to address insufficient liquidity, both on the balance sheet and in the market. We are not clear how this can be done without more debt or new equity.’

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Key stats
Dividend yield 0%
Market capitalisation £780m
No. of shares out 941m
No. of shares floating 920m
No. of employees 1,091
Trading volume (10 day avg.) 4.8m
Turnover £2,965m
Profit before tax £468m
Earnings per share 16.54p
Cashflow per share 19.42p
Cash per share 27.86p

More certainty over Just Group, says Numis

There is more certainty around retirement specialist Just Group (JUST) after its capital raise and Numis says it should be valued at a higher multiple.

Analyst Marcus Barnard retained his ‘buy’ recommendation but reduced the target price from 200p to 160p. The shares were trading at 82.3p yesterday.

The company has laid out plans for growth and the amount of capital it will hold to maintain a comfortable solvency margin.

‘With the capital raise, we believe that there is now more certainty over these plans,’ he said.

‘Shareholders should take comfort from the stronger balance sheet and we believe should value the business at a higher multiple of its rebased earnings, compared to five times earnings per share previously.’

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Key stats
Dividend yield 2.7%
Market capitalisation £100m
No. of shares out 173m
No. of shares floating 104m
No. of employees 53
Trading volume (10 day avg.) 0.2m
Turnover £28m
Profit before tax £7m
Earnings per share 3.06p
Cashflow per share 3.28p
Cash per share 11.53p

Miton Group needs positive flows for progress, says Peel Hunt

Investment manager Miton Group (MGRM) has had a slow start to 2019 and Peel Hunt says more positive flow momentum is required for the shares to make ‘material progress’.

Analyst Stuart Duncan retained his ‘add’ recommendation and target price of 60p on the stock after final results were ahead of expectations but ‘the more challenging conditions in the fourth quarter have continued into 2019’.

‘Net flows have been flat in the first couple of months given reduced demand from investors,’ he said.

‘Miton now trades on an enterprise value/earnings [ratio] of 8.5 times to December 2019 and yields 4.6%. This valuation does look relatively attractive, although we retain our “hold” recommendation as we believe a return to positive flow momentum is required for the shares to make material progress.’

The shares jumped 11.7% to 58.1p yesterday.

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Worldpay takeover is a marriage of strength

Worldpay (WPY) is to be acquired by US payments giant FIS in a $43 billion (£32 billion) deal that will give the enlarged group a ‘strong position’ in the digital payments market, says AJ Bell.

Worldpay processes billions of payment transactions a year on which it collects fees and also advises customers on how to lower costs to credit issuers and card networks.

‘FIS focuses on retail and institutional banking, payments, asset and wealth management, risk and compliance, and outsourcing solutions,’ said analyst Russ Mould.

‘Parking the two companies together gives the enlarged business a very strong position by which to play the structural growth in digital payments. They will be able to provide clients a wider portfolio of services, suggesting this is a highly complementary corporate tie-up.’

The shares jumped 9.8% to £81.33 yesterday.

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