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The Expert View: JD Wetherspoon, BSkyB and ASOS
Our daily round-up of analyst recommendations and commentary, featuring Standard Chartered and CSR.
by Harry Brooks on May 03, 2012 at 05:01
We’ve rounded up some of the best comment from analysts to give you their views on JD Wetherspoon, BSkyB, ASOS, Standard Chartered and CSR.
Peel Hunt cuts JD Wetherspoon's target price as pub taxes bite
Paul Hickman, analyst at Peel Hunt, has cut his target price for pub chain JD Wetherspoon (JDW.L) as he believes an increasing tax burden on the group will hit the share price.
In the 13 weeks to 22 April like-for-like sales increased by 2%, significantly ahead of Hickman's projection of a 0.5% decline. However, the analyst was unimpressed: 'This does not mean that April was any other than awful – however, only three weeks of April are in this statement, which rather reflects a strong March (the first six weeks were already reported at -0.7%).'
The statement noted that the recent Budget has upped the pressure on pub operators with a number of tax changes. As well as excise duty, there was a change in allowances for fruit machine taxation and a new 'late-night levy'.
Over the coming tax year JD Wetherspoon expects these three changes to cost the group about £11 million. The group further noted that the fruit machine and late-night levies would not affect supermarkets, further increasing the taxation disparity.
Shares in the group, for which Hickman now has a target price of 430p, down from 440p previously, closed at 408p on Wednesday, up 0.10p or 0.02%.
Jeffries sticks with 'hold' on BSkyB amid record results
Will Smith, analyst at Jeffries, has reiterated his 'hold' recommendation on broadcasting group British Sky Broadcasting (BSY.L) following the publication of record results.
Revenues rose 5% to an all-time high of £5.1 billion in the nine months to the end of March, and adjusted operating profit increased 15% to £908 million. The gains came off the back of strong growth in the group’s home communications products, with 702,000 net broadband, telephony and line-rental product additions, BSkyB said.
'Overall, it is a decent set of results even after adjusting for a £26 million one-off tax benefit,' Smith said. 'Importantly, Sky continued to show growth in its TV subscriber base, which should help alleviate some concerns that the business is ex-growth.'
Over at Charles Stanley, meanwhile, analyst Richard Nunn cautioned that the ongoing review by UK regulator OFCOM regarding News Corp – which owns a controlling stake in the company – remains a longer-term threat to the group. BSkyB's chief executive, Jeremy Darroch, told journalists on a conference call on Wednesday that the regulator's investigation should focus on its performance, rather than accusations against News Corp. 'I would emphasise that it's important to remember that Sky and News Corporation are separate companies,' he said.
Shares in the group closed at 701.50p on Wednesday, up 10.50p or 1.52%
Singer upgrades ASOS to 'buy' as shares dip
Matthew McEachran, analyst at Singer Capital Markets, has upgraded online fashion retailer ASOS (ASOS.L) from 'fair value' to 'buy' after a disappointing trading update led to a slump in the price of the shares.
Shares in the group have fallen about 12% since the fourth-quarter update was released last Thursday. The trading update showed that retail sales growth had slowed to 34%, missing analyst expectations by some 10%.
'The market believes ASOS has dropped permanently onto a different growth trajectory,' McEachran said. 'We disagree and believe the slow-down is partly explained by a lag effect between adopting a more disciplinedretail strategy (good for profitability/working capital efficiency) and a new reinvestment phase (driven by this strategy and supply chain/mix benefits).'
The analyst expects growth to come back into line with market expectations in the group's 2013 financial year, and possibly even beat forecasts in the second half. 'With so much scope for reinvestment, we maintain our positive view on future sales and earnings potential,' he said.
Shares in the group, for which McEachran has retained his target price of £19.50, closed at £14.80 on Wednesday, down 3p or 0.20%.
Investec backs Standard Chartered on reassuring trading statement
Ian Gordon, analyst at Investec, has reiterated his 'buy' recommendation on London-headquartered bank Standard Chartered (STAN.L) following results that he said suggested the group is 'comfortably on track'.
According Peter Sands, the bank's group chief executive, 'The group had a strong start to the year, with high single digit income growth over the comparative period of 2011... Overall the group delivered low double digit growth in operating profit in the first quarter over the comparable period in 2011.'
Gordon said this was reassuring: 'Ahead of today's 'no numbers' Q1 IMS, the market had developed cold feet - consensus expectations anticipate a slight miss against FY12 guidance of double-digit revenue and EPS growth whereas, in our view, all evidence suggests that STAN remains comfortably on track.'
The real debate isn't about whether the bank can meet its forecasts, Gordon said, but rather what it will do with its emerging surplus. The group used its statement to announce that an accelerated investment programme has now been approved, which will presumably answer this question in due course.
Shares in the group, for which Gordon has a target price of £18, closed at £14.53 on Wednesday, down 59p or 3.90%.
Liberum Capital ups forecasts for CSR
Eoin Lambe, analyst at Liberum Capital, has upgraded his earnings per share (EPS) forecasts for electronics maker CSR (CSR.L) following the publication of strong quarterly results.
In the 13 weeks to 30 March revenues hit $227 million, up from $163.9 million in the year-ago period. Underlying operating profit improved to $2.7 million, up from nothing in the previous year.
Noting that CSR has beaten consensus numbers for two quarters in a row, Lambe has lifted his 2012 EPS forecast by 12% and his 2013 forecast by 7%. 'The well documented revenue headwind from declining legacy products should be offset by growth in autos, wireless audio, cameras and location,' he said. 'CSR remains a cash-generative business.'
Although he said a bid for the company as a whole remains unlikely, a sale of the handset business could make sense. Lambe retains his 'buy' recommendation on the company.
Shares in the group closed at 235.30p on Wednesday, up 12.50p or 5.61%.
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Look up the shares
- ASOS PLC (ASOS.L)
- British Sky Broadcasting Group PLC (BSY.L)
- JD Wetherspoon PLC (JDW.L)
- CSR PLC (CSR.L)
- Standard Chartered PLC (STAN.L)