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The Expert View: Lloyds, CSR and Genus
Our daily round-up of analyst recommendations and commentary, featuring Man Group and Carpetright.
by Harry Brooks on Jul 25, 2012 at 05:01
We’ve chosen some of the best comment from analysts to give you their views on Lloyds, CSR, Genus, Man Group and Carpetright.
UBS previews Lloyds' first-half results, reiterates 'buy'
John-Paul Crutchley, analyst at UBS, has reiterated his 'buy' recommendation on Lloyds (LLOY.L) ahead of tomorrow's first-half results announcement.
The analyst expects pre-tax profits of £938 million in the period, with margins weakening from the first half as a result of the extra liquidity held ahread of Moody's decision on credit ratings.
'We also expect the lending volumes to remain challenging with contraction in both the core and non-core balance sheets but for the group to have shown good momentum in deposits with growth here ahead of the 3-4% market rate,' he added.
The tone of tomorrow's statement will be more significant than the figures it contains, Crutchley said, as the market looks for signs of action on the Bank of England's suggestion that banks reduce liquidity levels to boost the wider economy. 'The market will look for some evidence that this may contribute to a better than expected top-line and hence earnings momentum in forthcoming quarters,' he said.
Shares in the group, for which the analyst has a target price of 50p, closed at 29.03p on Tuesday, down 0.26p or 0.90%.
FinnCap downgrades CSR after Samsung deal
Lorne Daniel, analyst at FinnCap, has downgraded integrated circuit maker CSR (CSR.L) from 'buy' to 'hold' following a rise in the shares after last week's disposal of its smartphone operations to Samsung.
The Cambridge-based company will receive $310 million from Samsung in a deal that was widely welcomed by shareholders. CSR followed this news with the publication of its second-quarter results yesterday, which revealed a 37% rise in revenues to $266.5 million.
The group expects to meet consensus revenue expectations for the full year, although it warned that trading in the second half will be tougher going.
Despite calling the results strong Daniel stood by his downgrade: 'the shares have seen strong appreciation to meet our target price and we now feel the stock will see some consolidation at this level, so we lower our recommendation to a hold,' he said.
Shares in the group closed at 295.20p on Tuesday, down 6.5p or 2.15%.
Panmure Gordon downgrades Genus to 'sell'
Graham Jones, analyst at Panmure Gordon, has cut his recommendation for livestock genetics business Genus (GNS.L) from 'hold' to 'sell' based on deteriorating forecasts for the year ahead.
'While we remain bullish on the long-term prospects of the business, we think the short-term outlook has deteriorated,' Jones said. Direct feed costs are expected to rise as a result of a drought in the US, and Jones also pointed to falling profitability in some of Genus's markets.
'US hog prices have weakened recently as farmers sell pigs early, and industry margins look squeezed for the next three quarters, as reductions in breeding herds take time to tighten market supply,' he said. Falling milk prices are also having a knock-on effect on dairy herds, he added.
Genus shares now trade at a price-to-earnings ratio of 26.3x, and given the above challenges Jones said this now looks too steep.
Shares in the group closed at £13.37 on Tuesday, down 12p or 0.89%.
Peel Hunt puts Man Group under review on 'predictably bad' results
Stuart Duncan, analyst at Peel Hunt, has put his recommendation for hedge-fund manager Man Group (EMG.L) under review following the publication of what he called a 'predictably bad' set of interim results.
In the six months to 30 June adjusted pre-tax profits fell 48% to $121 million, and clients withdrew a net $2.4 billion over the period. The outflows combined with falling stock markets meant funds under management fell to $52.7 billion from $59 billion at the end of March.
Even though the shares have lost 40% of their value this year Duncan remains wary about their value: 'there is little sign of any stability as visibility on earnings remains extremely limited,' he said.
'On current consensus earnings, Man is trading on a December 12 price-to-earnings ratio of 12.5x, although consensus is likely to move lower as forecasts are updated. We place our recommendation under review, but expect that our target price will move significantly lower than our current 110p.'
Shares in the group closed at 71.90p on Tuesday, up 2.75p or 3.98%.
Merchant Securities says 'sell' Carpetright
Amisha Chohan, analyst at Merchant Securities, has reiterated her 'sell' recommendation on floor coverings business Carpetright (CPR.L) in spite of an encouraging trading update.
In the the 12 weeks ended 21 July like-for-like (LFL) sales rose 1.7%, although total sales fell 2.1% as a result of four stores being shut down. 'The initiatives (refurbished stores, improve bed sales, widen laminate portfolio) of the turnaround are beginning to bear fruit, demonstrated by the uplift in the core UK retail business,' Chohan said.
Nonetheless, the analyst warned that the company looks fundamentally overvalued: assuming 2013 earnings per share of 10.3p means the shares are trading at 60x. 'The group needs to start rebuilding investor confidence. The euro crisis, fragility in the UK market especially surrounding the housing market and consumer sentiment do not bode well for the business,' she concluded.
Shares in the group closed at 610.00p on Tuesday, down 5p or 0.81%.
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Look up the shares
- Carpetright PLC (CATVU.L)
- Man Group PLC (EMG.L)
- CSR PLC (CSR.L)
- Lloyds Banking Group PLC (LLOY.L)
- Genus PLC (GENS.L)