The Expert View: Barclays, Burberry and Debenhams

Our daily round-up of analyst recommendations and commentary, featuring Barclays, Burberry, Debenhams, Go-Ahead Group and Bunzl.

Key stats
Market capitalisation	£28,967m
No. of shares out	12,236m
No. of shares floating	11,253m
No. of common shareholders	not stated
No. of employees	139000
Trading volume (10 day avg.)	42m
Turnover	£20,589m
Profit before tax	£3,007m
Earnings per share	24.01p
Cashflow per share	40.26p
Cash per share	876.25p

*Correct as at 19 Oct 2012

Canaccord says the time to buy Barclays is over

Gareth Hunt, analyst at Canaccord, has downgraded Barclays (BARC.L) from 'buy' to 'hold', saying the more than 50% rise in the shares over the past three months means they no longer look like a compelling purchase.

Hunt said when the shares were trading at a low of around 160p in the wake of the Libor-fixing scandal the market was treating the BarCap investment banking division as if it had a negative value. This wasn't justified, he said, given the potential to restructure the bank's operations.

However, at the current price the valuation is completely different. 'At 245p we believe BarCap is being valued at about £8.2 billion. While we are lifting our 2013 and 2014 estimates (2012 goes lower owing to housekeeping changes on own debt charges and PPI charges) we no longer see the sharp discount to fair value at which we prefer to Buy BARC and, as such, downgrade to hold.'

Shares in the group closed at 235.63p on Friday, down 5.07p or 2.11%.

Key stats
Market capitalisation	£5,247m
No. of shares out	442m
No. of shares floating	436m
No. of common shareholders	not stated
No. of employees	7991
Trading volume (10 day avg.)	4m
Turnover	£1,857m
Profit before tax	£264m
Earnings per share	59.33p
Cashflow per share	79.43p
Cash per share	124.65p

*Correct as at 19 Oct 2012

Investec upgrades Burberry to 'buy'

Bethany Hocking, analyst at Investec, has upgraded high-end fashion retailer Burberry (BBY.L) from 'hold' to 'buy', saying she's once again bullish on the group's prospects following September's profit warning.

Hocking welcomed news that the group's more expensive ranges are performing well. 'In our view, the ongoing elevation of the brand’s luxury positioning is crucial, reducing exposure to aspirational luxury shoppers who are likely to suffer more in downturns,' she said.

Following September's profit warning, which wiped around 30% from the value of the shares, Hocking has pulled back her capital expenditure forecasts, saying spending will be subject to more scrutiny from here. Together with tweaked sales forecasts, this leads her to a target price of £13.00, up from £11.40 previously.

'The Burberry brand is far from broken, operational leverage should come through, and, whilst volatility will remain, we see long-term value here – Buy,' she concluded. Burberry shares feature in Citywire AA-rated Alister Hibbert's BlackRock European Dynamic fund.

Shares in the group closed at £11.84 on Friday, up 4p or 0.34%.

Key stats
Market capitalisation	£1,424m
No. of shares out	1,271m
No. of shares floating	1,159m
No. of common shareholders	not stated
No. of employees	8735
Trading volume (10 day avg.)	6m
Turnover	£2,210m
Profit before tax	£117m
Earnings per share	9.11p
Cashflow per share	16.26p
Cash per share	2.25p

*Correct as at 19 Oct 2012

Seymour Pierce raises target price for Debenhams

Kate Calvert, analyst at Seymour Pierce, has increased her target price for department store Debenhams (DEB.L) ahead of its full-year results on Thursday, saying the pre-close update leaves her confident the group will meet expectations.

'There should be no surprises in headline numbers,' the analyst said, pencilling in a 2.6% increase in gross transaction value and an 8% increase in pre-tax profits to £160 million. Her target price goes from 100p to 110p.

Investors in the group, including Richard Buxton, who manages the Citywire Selection star pick Schroder UK Alpha Plus fund, have been handsomely rewarded with an 80% rise in the value of the shares since the start of the year.

Calvert praised the management, saying they've done a good job of steering the business through the prolonged downturn, which has hit retailers particularly hard. 'We maintain a Hold recommendation but raise our target price to 110p from 100p to reflect the sector re-rating,' she added.

Read Smart Investor's take on Debenhams, where he considers whether the shares can continue their vertiginous rise.

Shares in the group closed at 111.4p on Friday, down 0.5p or 0.45%.

Key stats
Market capitalisation	£588m
No. of shares out	43m
No. of shares floating	37m
No. of common shareholders	not stated
No. of employees	22972
Trading volume (10 day avg.)	0m
Turnover	£2,424m
Profit before tax	£56m
Earnings per share	128.87p
Cashflow per share	301.85p
Cash per share	595.30p

*Correct as at 19 Oct 2012

UBS lifts target price for Go-Ahead Group

Alex Brignall, analyst at UBS, has increased his target price for passenger transport operator Go-Ahead Group (GOG.L) following a trading update that featured an ambitious profit target, albeit with few details on how it'll be achieved.

Go-Ahead Group has 3,800 buses carrying about 1.7 million passengers every day, and three rail franchises: Southern, Southeastern and London Midland.

The first-quarter trading update showed 5% organic revenue growth in the bus division excluding London, with London revenues up 6%. Rail revenues were up 10% on an underlying basis.

The big news, however, was the new £100 million 2016 profit target for bus operations.

'Whilst the new target is encouraging, it is clearly challenging, with anout 12.5% annual earnings before interest and tax compound annual growth rate (CAGR) required from 2014-16 (2013 is flat), against 5% CAGR in the last five years,' the analyst said.

'Management indicated that the growth will come from ex-London Bus in the main, but there was limited detail on the mix of revenue and profitability growth to hit the targets.' Nonetheless, the analyst has increased his target price from £12 to £12.50, and retains his 'neutral' stance.

Shares in the group closed at £13.44 on Friday, down 21p or 1.54%.

Key stats
Market capitalisation	£3,467m
No. of shares out	332m
No. of shares floating	324m
No. of common shareholders	not stated
No. of employees	11956
Trading volume (10 day avg.)	0m
Turnover	£5,110m
Profit before tax	£124m
Earnings per share	37.99p
Cashflow per share	60.05p
Cash per share	22.44p

*Correct as at 19 Oct 2012

Shore Capital reiterates 'buy' on Bunzl

Robin Speakman, analyst at Shore Capital, has reiterated his 'buy' recommendation on outsourcing group Bunzl (BNZL.L), saying trading remains solid despite weaker global growth trends.

In the third quarter growth at the group, which takes it name from founder Moritz Bunzl, hit 5% in constant currency terms. However, this was lifted by acquisitions, with organic growth a more sluggish 2%.

The analyst praised the group's resilience in the face of weak economic growth. 'Acquisition activity provided a boost for revenues in Continental Europe; strong revenue growth in evident, but with a weaker margin mix here,' Speakman said. 'Revenues in UK & Ireland remain sluggish, but the margin continues to lift. The rest of the world region remains strong with some margin pressure evident.'

Shares in the group closed at £10.40 on Friday, down 42p or 3.88%.