The Expert View: Aviva, Sage and Hiscox

We’ve chosen some of the best comment from analysts to give you their views on Aviva, Sage, Hiscox, Carpetright and Fidessa.

Key stats
Market capitalisation	£8,660m
No. of shares out	2,906m
No. of shares floating	2,871m
No. of common shareholders	not stated
No. of employees	36562
Trading volume (10 day avg.)	11m
Turnover	£36,003m
Profit before tax	£483m
Earnings per share	16.68p
Cashflow per share	34.47p
Cash per share	793.02p

*Correct as at 31 Jul 2012

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%.

Key stats
Market capitalisation	£3,744m
No. of shares out	1,278m
No. of shares floating	1,261m
No. of common shareholders	not stated
No. of employees	12385
Trading volume (10 day avg.)	5m
Turnover	£1,334m
Profit before tax	£256m
Earnings per share	19.29p
Cashflow per share	23.05p
Cash per share	13.81p

*Correct as at 31 Jul 2012

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%.

Key stats
Market capitalisation	£1,749m
No. of shares out	392m
No. of shares floating	369m
No. of common shareholders	not stated
No. of employees	1254
Trading volume (10 day avg.)	0m
Turnover	£1,187m
Profit before tax	£21m
Earnings per share	5.33p
Cashflow per share	7.36p
Cash per share	66.66p

*Correct as at 31 Jul 2012

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%.

Key stats
Market capitalisation	£406m
No. of shares out	67m
No. of shares floating	46m
No. of common shareholders	not stated
No. of employees	3300
Trading volume (10 day avg.)	0m
Turnover	£472m
Profit before tax	£11m
Earnings per share	16.30p
Cashflow per share	37.93p
Cash per share	14.29p

*Correct as at 31 Jul 2012

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%.

Key stats
Market capitalisation	£519m
No. of shares out	37m
No. of shares floating	33m
No. of common shareholders	not stated
No. of employees	1748
Trading volume (10 day avg.)	0m
Turnover	£278m
Profit before tax	£30m
Earnings per share	80.96p
Cashflow per share	169.90p
Cash per share	191.71p

*Correct as at 31 Jul 2012

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%.