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The Expert View: Aviva, Sage and Hiscox
Our daily round-up of analyst recommendations and commentary, featuring Carpetright and Fidessa.
by Harry Brooks on Aug 01, 2012 at 05:01
We’ve chosen some of the best comment from analysts to give you their views on Aviva, Sage, Hiscox, Carpetright and Fidessa.
JP Morgan previews Aviva's first-half results, retains 'overweight' stance
Ashik Musaddi, analyst at JP Morgan, has reiterated his 'overweight' recommendation on insurance group Aviva (AV.L) ahead of the publication of its first-half results on 9 August.
The analyst expects the interim dividend per share to remain level at 10p, noting that the management has said it does not plan to cut the dividend to improve its capital position. He expects operating profits to fall to £1.1 billion from £1.3 billion in the same period in 2011.
'The decline is due to lower life operating earnings from deconsolidation of Delta Lloyd, and continuing earnings pressure in Italy and Spain,' he said.
'We maintain our Overweight recommendation as we believe that Aviva laid out a sensible and reasonably achievable strategy at its investor day. Its shares are trading at 66% of EV and offer an 8.7% yield,' he concluded.
Shares in the group closed at 292.50p on Tuesday, down 6.50p or 2.17%.
UBS downgrades Sage
Michael Briest, analyst at UBS, has downgraded business software firm Sage (SGE.L) from 'buy' to 'neutral' on valuation grounds.
Briest attended a recent investor's day, where the group outlined plans to focus its energy on core products and potentially divest 10% of its non-core offerings. It also plans to develop a range of low- and mid-market cloud computing products.
Although the analyst backed the strategic vision, he said the shift to cloud computing carries a degree of risk.
Feedback from customers on subscription pricing, which entails a longer payback period than traditional licence models, has been 'lukewarm', the analyst said. Additionally, the harsh economic climate will unsurprisingly have a knock-on effect on sales, he said.
The analyst's target price increases from 295p to 305p as a result of a recent share buyback.
Shares in the group closed at 288.20p on Tuesday, down 10.70p or 3.58%.
Nomura lifts target price for Hiscox
Fahad Changazi, analyst at Nomura, has increased his target price for specialist insurer Hiscox (HSX.L) following the publication of a strong set of half-yearly results.
Pre-tax profits over the period hit £126 million compared with a loss of £86 million in the year-ago period. Outgoing chairman Robert Hiscox, who will be replaced by Robert Childs next year, said the results marked 'a welcome return to our profitable course after the battering we and the insurance industry received from Mother Nature last year.'
Changazi said Childs' appointment is a positive development, and he praised the group's steady returns in comparison with some other insurers. He has raised his 2012 projected earnings by 28% on the back of the stronger first-half results, and his target price increases to 437p from 431p.
Nonetheless, the analyst said that at its current price there's better value elsewhere in the sector, and he retains his 'reduce' recommendation.
Shares in the group closed at 443.60p on Tuesday, up 7.60p or 1.74%.
Merchant Securities reiterates 'sell' on Carpetright
Amisha Chohan, analyst at Merchant Securities, has reiterated her 'sell' recommendation on floor-coverings and beds retailer Carpetright (CRP.L) amid news that new mortgage approvals have dipped to their lowest level in 18 months.
Figures from the Bank of England that were released on Monday showed that 44,192 new loans were approved in June, down from 50,544 in May.
'Weakness in the UK housing market will continue to adversely impact larger household purchases such as flooring and beds,' Chohan noted. 'The business operates in a highly cyclical environment. We do not expect to see dramatic improvements in UK housing transactions, which traditionally represented 25% of group turnover.'
Although the analyst said Carpetright's plan to refurbish its stores is the right one, she warned that the shares are 'fundamentally overvalued', trading at 61x this year's estimated earnings.
Shares in the group closed at 592.50p on Tuesday, down 12p or 1.99%.
Peel Hunt trims growth forecasts for Fidessa
Alex Jarvis, analyst at Peel Hunt, has downgraded his growth forecasts for trading software provider Fidessa (FDSA.L) following the publication of a disappointing trading update.
Group sales rose 3% in the three months ending 30 June, and adjusted profit was up 4% at £22.1 million, close to forecasts. However, Jarvis said the outlook remains cautious, and he expects lower margins this year and no improvement in 2013.
'We now look for 1-2% growth from Fidessa this year and 3-4% next, down from 5% and 7% respectively ahead of the interims,' he said. 'Visibility and cash generation remaingood but, with limited growth, we see more attractive investment opportunities elsewhere in tech.'
Shares in the group, for which Jarvis has a 'hold' recommendation, closed at £13.99 on Tuesday, down 6p or 0.43%.
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Look up the shares
- Hiscox Ltd (HSX.L)
- Carpetright PLC (CATVU.L)
- Aviva PLC (AV.L)
- Sage Group PLC (SGE.L)
- Fidessa Group PLC (FDSA.L)