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The Expert View: Chariot Oil & Gas, Thomas Cook and Logica
Our daily round-up of analyst recommendations and commentary, featuring Pearson and Travis Perkins.
by Harry Brooks on May 15, 2012 at 05:01
We’ve rounded up some of the best comment from analysts to give you their views on Chariot Oil & Gas, Thomas Cook, Logica, Pearson and Travis Perkins.
Peel Hunt downgrades Chariot Oil & Gas to 'sell' as Tapir South abandoned
Werner Riding, analyst at Peel Hunt, has slashed his recommendation on independent oil and gas exploration company Chariot Oil & Gas (CHAR.L) from 'buy' to 'sell' following news that its Tapir South well offshore Namibia has been abandoned as it does not contain commercially viable oil reserves.
Paul Welch, CEO of Chariot, said: 'Whilst the results of the Tapir South well are disappointing, this is the first well of a longer term drilling campaign within a frontier region and only the second well ever to have been drilled in the Namibe basin.'
Riding said that the negative result from the well suggested that the basin may be less fruitful than hoped, although the area to the north of the licence, including Chariot's Zamba prospect, remains attractive as it feeds off a different basin.
Although Riding said that the shares would doubtless fall on the bad news, the company still has chances ahead of it. 'Chariot is due to take part in Nimrod (458p/share risked) a potentially even higher-impact exploration well in early third quarter 2012, and so with one eye on Nimrod and considering Chariot remains fully-funded for the planned forward programme, we do not consider the fat lady to be singing just yet.'
Shares in the group closed at 89.22p on Monday, down 60.03p or 40.22%.
UBS cuts target price for Thomas Cook
Alex Brignall, analyst at UBS, has cut his target price for high-street travel agent Thomas Cook (TCG.L), saying the recently announced £1.4 billion refinancing package looks like a short-term fix.
£350 million of this will be used to shore up the balance sheet until 2015, Brignall said, and the cash has also been used to extent the existing to revolving credit facility. The analyst said the initiative will increase financing costs by about £28 million year-on-year, and comes on top of £14 million of new leasing costs.
'The continued focus on revolving finance suggests that significant seasonal cash flow swings are also likely to continue,' he said. The group's first-half pre-release showed profits falling year-on-year in all regions, he added. The analyst has cut his 2012 earnings forecast by 14% to £178 million.
'Whilst the new financing helped avoid the issuance of further capital in the short-term, the new deadline of 2015 on existing financing puts significant pressure on the operational turnaround of the business, in our view,' he said. 'We believe additional financing costs will significantly reduce shareholder returns and see no prospect of a positive post-exceptional cash-flow yield to shareholders before 2016.'
Shares in the group, for which Brignall now has a target price of 21p, closed at 19.25p on Monday, down 2p or 9.41%.
Deutsche Bank upgrades Logica to 'buy'
Marc Geall, analyst at Deutsche Bank, has upgraded Reading-headquartered IT and management consultancy company Logica (LOG.L) from 'hold' to 'buy' as he believes the latest set of quarterly results show a company that is stabilising against a tough economic backdrop.
Quarterly results published last week were broadly in line with expectations, with revenues falling 1% to £971 million and total orders falling 24%. Geall noted that the fall in orders was largely due to tough comparative figures for the UK and Benelux.
'First quarter 2012 revenues are within the full year growth band and demonstrate stability in a tough environment,' the analyst said. 'With stabilisation evident and valuation looking like it discounts the worst, we upgrade from hold to buy with our target price unchanged at 100p.'
He added that the shares are now trading on 6.2x estimated 2013 earnings per share. 'In our view, management has made the changes needed, though with some continued risk we feel an 8.5x multiple is warranted,' he said, adding that this is the basis of his target price.
Shares in the group closed at 69.76p on Monday, down 4.19p or 5.67%.
JP Morgan lifts target price for Pearson
Mark O'Donnell, analyst at JP Morgan, has increased his target price for media and education group Pearson (PSON.L) as he believes that fears about ebook price fixing allegations are overdone, and that underlying earnings per share (EPS) are set to rise in the year ahead.
Although O'Donnell said he expects the headline estimated 2012 EPS figure to decline 3%, once this figure is adjusted for one-offs and the impact of mergers and acquisitions it will show a 7% gain.
Concerns over possible ebook price fixing are overdone, hea said: 'Consumer ebooks price fixing allegations are not a threat to the agency model itself or to education (school books are sold direct via PSON sales force rather than retailers, college books are sold via wholesale model rather than agency model).'
The analyst has upped his target price from £14.40 to £14.40 based on his discounted cash flow estimate for this year. 'we reiterate our overweight rating with this strong structural growth story having the opportunity now to better outperform as the market switches its focus back to defensives,' he concluded.
Shares in the group closed at £11.55 on Monday, down 11.08p or 0.95%.
Seymour Pierce says 'buy' Travis Perkins
Kevin Lapwood, analyst at Seymour Pierce, has reiterated his 'buy' recommendation on building materials retailer Travis Perkins (TPK.L) following the pubication of resilient quarterly results.
'Given the recent dire UK construction statistics, dreadful weather and the poor level of consumer confidence the results from Travis Perkins in the four months to April were surprisingly strong,' Lapwood said. According to the trading statement revenues rose 4.4% in the first four months of this year, beating consensus estimates. The group's outlook for the year ahead remains unchanged.
Lapwood noted that like-for-like market share rose in all four of the group's divisions.
Over at Oriel Securities, analyst Mark Howson said that Travis Perkins remains 'a sensible company doing sensible things'.
Shares in the group closed at 956.03p on Monday, down 35.97p or 3.63%.
More about this:
Look up the shares
- Logica PLC (LOG.L)
- Pearson PLC (PSON.L)
- Thomas Cook Group PLC (TCG.L)
- Chariot Oil and Gas Ltd (CHARC.L)
- Travis Perkins PLC (TPK.L)