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The Expert View: Chariot Oil & Gas, Premier Oil and Standard Chartered
Our daily round-up of analyst recommendations and commentary, featuring Associated British Foods, Fenner and Debenhams.
by Harry Brooks on Sep 11, 2012 at 05:01
We’ve chosen some of the best comment from analysts to give you their views on Chariot Oil & Gas, Premier Oil, Standard Chartered, Associated British Foods, Fenner and Debenhams.
Peel Hunt downgrades Chariot Oil and Gas to 'sell'
Werner Riding, analyst at Peel Hunt, has downgraded Chariot Oil & Gas (CHAR.L) from 'hold' to 'sell' after its Kabeljou-1 well off the coast of Namibia came up dry.
The shares crashed 64% yesterday morning in the wake of the announcement. Riding has slashed his target price from 150p to 40p: 'We had previously carried 480p per share on a risked basis for the Nimrod prospect, however stripping this out of our risked exploration net asset value leaves us with only adjusted balance sheet cash of £67.7 million or 33p/share as core net asset value,' he said.
The analyst added that this new target price would be in place until there's clarity on which firm prospects will be included in the next exploration drilling campaign. 'Despite having a robust balance sheet with about $100 million net cash, Chariot’s pipeline of drilling related news looks to have run dry until 2H 2013 at the earliest.'
Shares in the group closed at 32.83p on Monday, down 65.42p or 66.59%.
Liberum downgrades Premier Oil to 'sell'
Andrew Whittock, analyst at Liberum, has downgraded Premier Oil (PMO.L) from 'hold' to 'sell', believing the company's purchase of a 60% stake in Rockhopper Exploration's Sea Lion field in the Falklands limits its growth prospects.
In July Premier made an initial payment of $231 million for the stake, and also agreed to pay exploration costs up to $770 million. Whittock expects Premier to spend at least $250 million a year on Sea Lion, meaning no significant free cash flow is available for shareholders until 2018.
'The Falklands assets may, in time, offer a new range of opportunities. However, activity until 2015 will focus on the development of today’s well known assets, exploration of the legacy portfolio and the Sea Lion development. There appear few near term positive catalysts,' he said.
'With the prospect of newsflow dominated by Sea Lion development issues and discoveries that may not move the dial, we believe there is more upside in other shares.'
Morgan Stanley analysts share Whittock's pessimism on the shares, having downgraded to 'equal weight' from 'overweight' last month.
Shares in the group closed at 382.57p on Monday, down 4.83p or 1.25%.
Investec says Standard Chartered's recovery isn't over yet
Ian Gordon, analyst at Investec, has reiterated his 'buy' recommendation on Standard Chartered (STAN.L), saying the bank has further to recover after accusations of money laundering from the New York Department of Financial Services (DFS) took a bite out of the share price.
Although the shares have gained 30% since the 7 August lows, Gordon said the recovery won't be complete until the US investigation is finished and the damage to the bank's reputation is made good. The bank paid a fine of $340 million to settle with DFS.
An investor day on 17 September offers a perfect opportunity to address the latter, while the US investigation 'will follow presently, but at US politicians’ convenience,' he said.
Gordon added that on 1 August the bank delivered a 10th year of record first-half revenues and profits. 'Little value remains elsewhere in the sector. Keep the faith. Buy,' he said.
Shares in the group closed at £14.25 on Monday.
Shore Capital sticks with 'buy' on Associated British Foods
Darren Shirley, analyst at Shore Capital, has reiterated his 'buy' recommendation on Associated British Foods (ABF.L) following a pre-close statement that confirmed ‘substantial growth’.
In the update ABF said earnings would be ‘substantially ahead of last year’, and Shirley was heartened by comments on cash flow, with debt at the year-end expected to be below £1.2 billion, marginally below the £1.21 billion he had pencilled in.
In terms of the company's various divisions, cut-price fashion retailer Primark is doing well, with full year growth hitting 17%, while sales of sugar and groceries were also robust. In the ingredients arm, meanwhile, Shirley is trimming his forecasts by £4 million as a result of ongoing challenges in the yeast business.
'Whilst 2012 has been a strong year for ABF, we expect such momentum to continue through at least into H1 2012/13, with weak margin comparatives across Primark, the non-recurrence of restructuring charges in grocery and the pricing with the EU sugar market remaining strong,' he concluded.
Shares in the group closed at £12.78 on Monday, down 28p or 2.14%.
FinnCap says 'buy' Fenner
David Buxton, analyst at FinnCap, has reiterated his 'buy' recommendation on conveyor-belt maker Fenner (FENR.L) following a trading update that suggests things are rolling along as expected.
The pre-close said financial results for the past year will be in line with expectations' showing 'substantial growth in revenues and profit against the previous year'.
Buxton noted that as expected weaker US coal prices would hit earnings in the region, but he said stockpiles in the country are now running down, which should improve the situation.
'The shares have underperformed recently and look decent long term value on a price to earnings ratio of 10x for 2012 and 9.5x for 2013,' Buxton said. 'We retain our Buy rating, although short term we see the shares needing a more positive catalyst.'
Shares in the group closed at 363.6p on Monday, up 3.1p or 0.86%.
Seymour Capital lifts target price for Debenhams
Kate Calvert, analyst at Seymour Capital, has lifted her target price for department store Debenhams (DEB.L) having attended an analyst day at its Milton Keynes store on Friday.
At the event the management said the emphasis remains on finishing off the refurbishment programme and building new shops.
'Debenhams has 39 of 165 stores left to refurbish which will take another two years. Management remains of the view that there is potential for 240 stores in the UK - a theoretical £1 billion sales opportunity (FY11 sales of £2.4 billion) which is unlikely to happen in our lifetime,' Calvert said.
Over the past three months shares in the group have rallied 29% and 87% over the last year as a result of new chief executive Michael Sharp's change from a reliance on volumes to sales. This rise in the share price means the company now has a similar rating to its rivals, trading at a 2013 price-to-earnings (P/E) ratio of 10.2x, compared with M&S and Next on 10.5x and 12.3x respectively. Calvert retains a 'hold' recommendation on the shares.
Shares in the group closed at 100.2p on Monday, down 0.2p or 0.2%.
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Look up the shares
- Standard Chartered PLC (STAN.L)
- Fenner PLC (FENR.L)
- Chariot Oil and Gas Ltd (CHARC.L)
- Associated British Foods PLC (ABF.L)
- Debenhams PLC (DEB.L)
- Premier Oil PLC (PMO.L)