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The Expert View: BP, Britvic and Hargreaves Lansdown

Our daily round-up of analyst recommendations and commentary, featuring Burberry and Petropavlovsk.

by Harry Brooks on Sep 06, 2012 at 05:01

We’ve chosen some of the best comment from analysts to give you their views on BP, Britvic, Hargreaves Lansdown, Burberry and Petropavlovsk.

Key stats
Market capitalisation£79,966m
No. of shares out19,035m
No. of shares floating17,135m
No. of common shareholdersnot stated
No. of employees83400
Trading volume (10 day avg.)16m
Turnover243,286m USD
Profit before tax16,177m USD
Earnings per share0.85 USD
Cashflow per share1.26 USD
Cash per share0.48 USD

*Correct as at 5 Sep 2012

Oriel warns DoJ pursuit of BP will weigh on shares

Richard Griffith, analyst at Oriel, has warned that the US Department of Justice (DoJ)'s decision to pursue BP (BP.L) for gross negligence and wilful misconduct risks hampering the share price for years to come.

On Tuesday the DoJ filed a brief in the US District Court in Louisiana accusing BP of 'plainly misleading representations' concerning the extent of its liability. BP denied from the outset that it should bear sole responsibility for the disaster, saying the spill was the result of many factors and the responsibility of several parties.

If found guilty Griffith estimates BP could face a fine of around $20 billion under the Clean Water Act. However, the analyst said multiple independent reports including the Presidential Commission and Marine Board of Investigation support BP's argument that the actions of Transocean and Halliburton contributed to the accident.

'The tone of the DoJ is clearly disappointing as it would appear to suggest that hope for an out of court settlement is fading. We expect BP to fight its corner and demonstrate that it was not grossly negligent,' Griffith concluded, reiterating his 'hold' recommendation on the shares.

Shares in the group closed at 421.85p on Wednesday, down 14.75p or 3.38%.

Key stats
Market capitalisation£897m
No. of shares out242m
No. of shares floating214m
No. of common shareholdersnot stated
No. of employees3532
Trading volume (10 day avg.)1m
Turnover£1,290m
Profit before tax£58m
Earnings per share23.70p
Cashflow per share43.39p
Cash per share19.03p

*Correct as at 5 Sep 2012

Canaccord upgrades Britvic on AG Barr merger plan

Wayne Brown, analyst at Canaccord, has upgraded Britvic (BVIC.L) from 'sell' to 'hold' on news it is set to merge with rival soft drinks maker AG Barr (BAG.L).

The companies confirmed yesterday that they are in talks over a merger that will see Britvic shareholders take 63% and AG Barr shareholders 37% of the enlarged group.

Brown said Britvic would benefit from AG Barr's management expertise in the shape of its chief executive Roger White. 'In our view the AG Barr management team have a very strong track record and would add significant strength to Britvic from both an operational and financial performance perspective,' he said.

The analyst's target price jumps 75% to 350p.

Shares in the group closed at 368.34p on Wednesday, up 39.74p or 12.09%.

Key stats
Market capitalisation£3,008m
No. of shares out474m
No. of shares floating177m
No. of common shareholdersnot stated
No. of employees657
Trading volume (10 day avg.)0m
Turnover£208m
Profit before tax£92m
Earnings per share19.58p
Cashflow per share20.10p
Cash per share23.23p

*Correct as at 5 Sep 2012

Peel Hunt puts Hargreaves Lansdown's target price under review

Stuart Duncan, analyst at Peel Hunt, has put his target price for investment supermarket Hargreaves Lansdown (HRGV.L) under review following full-year results that beat his expectations and as fears over the impact of new regulations fade.

In the year to 30 June pre-tax profit jumped 21% to £152.8 million with a similar rise in the dividend payments to shareholders. Total assets under administration bucked the falling stock market with a 7% rise to £26.3 billion.

On the regulatory front, Duncan said things are looking up: 'The industry in general is awaiting final regulation before clarifying ongoing pricing structures. However, as has been the case since the FSA’s u-turn on platform remuneration, Hargreaves remains confident that it will be able to replace any affected revenue.'

'Although the uncertain regulatory backdrop has prevailed for some time, Hargreaves business model has continued to deliver strong growth, at high operating margins, and with highcash generation. We place our target price under review, with the previous 450p being overly pessimistic as the regulatory picture clears.'

Duncan retains a 'hold' recommendation on the shares, and noted that they are currently trading close to their June 2011 high.

Shares in the group closed at 630.32p on Wednesday, down 0.18p or 0.03%.

Key stats
Market capitalisation£5,848m
No. of shares out440m
No. of shares floating434m
No. of common shareholdersnot stated
No. of employees7991
Trading volume (10 day avg.)1m
Turnover£1,857m
Profit before tax£264m
Earnings per share59.33p
Cashflow per share79.43p
Cash per share124.65p

*Correct as at 5 Sep 2012

Seymour Pierce reiterates 'buy' on Burberry

Kate Calvert, analyst at Seymour Pierce, has reiterated her 'buy' recommendation on luxury clothing giant Burberry (BRBY.L) having been impressed by a sneak peek of the new Regent Street flagship store in London.

The new shop opens on 14 September, and if Calvert's reaction is anything to go by it might be worth a visit. 'It has been a while since I have gone into a store, stood there in awe and genuinely felt excited. This must be how Alice felt in Wonderland,' she said.

The analyst noted that technology is at the heart of this new shop, with vast TV screens showing the brand's catwalk shows, iPad-wielding staff and interactive mirrors.

'Management has raised the bar yet again, we believe, reinforcing its position at the leading edge of retail and fashion,' she said. Burberry's second-quarter results come out on 11 October, and Calvert expects continued sales momentum.

'We regard Burberry as a strong long term growth story with significant geographical and product mix opportunities as well as operational leverage,' she concluded.

Shares in the group closed at £13.28 on Wednesday, up 13.46p or 1.02%.

Key stats
Market capitalisation£651m
No. of shares out187m
No. of shares floating161m
No. of common shareholdersnot stated
No. of employees13385
Trading volume (10 day avg.)2m
Turnover795m USD
Profit before tax145m USD
Earnings per share0.77 USD
Cashflow per share1.19 USD
Cash per share0.72 USD

*Correct as at 5 Sep 2012

Nomura says 'buy' Petropavlovsk

Analysts at Nomura have reiterated their 'buy' recommendation on Russian mining firm Petropavlovsk (POG.L) on news that it is ending a hedging programme that proved unpopular with investors.

The firm announced yesterday that it has ended its 170,000 ounce gold hedging programme that cost it some $12.4 million.

Shares in the company have lost about 25% since its first-half results were released. 'Higher depreciation, net debt and interest charges saw earnings per share weaker than expected, but the main push back was on POG's 'ad hoc' gold cap and collar hedging program which had been previously unannounced and contained roughly an entire quarter of gold production,' Nomura said.

'As Petropavlovsk has the highest leverage to the gold price in the European space and the hedging not only removed this investment rationale but it also questioned management/communication once again, the market did not take kindly to it.'

The analysts said they hoped the company would remain unhedged in future, and that the 2013 consensus price-to-earnings ratio of 3.5x makes the shares look inexpensive.

Shares in the group closed at 351.57p on Wednesday, up 1.87p or 0.53%.

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  • Petropavlovsk PLC (POG.L)
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  • Hargreaves Lansdown PLC (HRGV.L)
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  • BP PLC (BP.L)
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  • Burberry Group PLC (BRBY.L)
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  • Britvic PLC (BVIC.L)
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