The Expert View: Marks & Spencer, 888 and Cairn Energy

We’ve chosen some of the best comment from analysts to give you their views on Marks & Spencer, 888, Cairn Energy, Reed Elsevier and Serco.

Key stats
Market capitalisation	£5,805m
No. of shares out	1,607m
No. of shares floating	1,581m
No. of common shareholders	not stated
No. of employees	81208
Trading volume (10 day avg.)	6m
Turnover	£9,934m
Profit before tax	£513m
Earnings per share	32.23p
Cashflow per share	60.28p
Cash per share	28.44p

*Correct as at 29 Aug 2012

Seymour Pierce sceptical as M&S opens flagship eco store

Kate Calvert, analyst at Seymour Pierce, has reiterated her 'hold' recommendation on Marks & Spencer (MKS.L), warning that infrastructure failings will hold back the progress of its giant new eco store on the Wirral.

The Cheshire Oaks shop opened yesterday, and is the group's most environmentally friendly venture to date. The building features an array of high-tech, energy efficient materials, and inside 'Browse & Order' hubs will help customers find what they're looking for.

'The shopping experience is more interactive with the merging of the online and physical shopping experience,' Calvert said. 'However, if you order an item in-store, it still takes three to five days to deliver, highlighting how much investment is still needed in the infrastructure.

'After the recent bid spec puff, we expect the shares to drift as there is a news vacuum until its first-half results on 6 November. With the shares trading on a calendarised 2013 price to earning ratio of about 11x, we retain our hold recommendation as we consider that there are better investment opportunities elsewhere.'

Analysts at Investec were also left unimpressed, slating the 'impersonal' womenswear section and 'at times weak in-store signage'. They reiterated a 'sell' stance on the shares.

Shares in the group closed at 359.1p on Wednesday, down 3.7p or 1.02%.

Key stats
Market capitalisation	£299m
No. of shares out	348m
No. of shares floating	134m
No. of common shareholders	not stated
No. of employees	929
Trading volume (10 day avg.)	0m
Turnover	210m USD
Profit before tax	1m USD
Earnings per share	0.00 USD
Cashflow per share	0.03 USD
Cash per share	0.13 USD

*Correct as at 29 Aug 2012

Peel Hunt downgrades 888 as shares surge

Nick Batram, analyst at Peel Hunt, has downgraded online gaming business 888 Holding (888.L) from 'buy' to 'hold' following a rise in the share price.

888 yesterday released an impressive set of half-yearly results, which showed earnings up 81% to £22.75 million, prompting it to reinstate its interim dividend of 2.5 cents per share.

'The recovery in profits over the past 12 months has been spectacular and, whilst we expect company guidance to remain conservative, growth will be more challenging going forward,' Batram said. A year ago investors were looking at a share price of just over 30p; it's now almost three times that.

'That said, 888 has an excellent suite of products and a strong marketing platform. After such a strong run we expect the shares to pause for breath and, with the shares within touchingdistance of our target price, we move to a hold.'

Shares in the group closed at 87.75p on Wednesday, up 2.25p or 6.36%.

Key stats
Market capitalisation	£1,710m
No. of shares out	602m
No. of shares floating	566m
No. of common shareholders	not stated
No. of employees	1178
Trading volume (10 day avg.)	3m
Turnover	0m USD
Profit before tax	-1,045m USD
Earnings per share	-1.89 USD
Cashflow per share	-1.36 USD
Cash per share	5.39 USD

*Correct as at 29 Aug 2012

UBS says wait for Cairn Energy entry window

Melanie Savage, analyst at UBS, has increased her target price for oil explorer Cairn Energy (CNE.L), saying first-half results suggest the company is making progress.

'Following Cairn’s first-half we feel the company is now well on the way to having the foundations for becoming a full-cycle explorer and producer with exposures to various levels of risk,' she said.

At the low-risk end it has exposure to established plays in the North Sea, and at the other end of the spectrum it boasts frontier prospects in Greenland, Spain, Morocco and potentially Cyprus.

However, Savage doesn't expect the high-impact projects to start coming online until the end of the year at the earliest, so retains her 'neutral' recommendation on the shares for now.

Her core net asset value estimate rises to 304p from 293p as a result of a rise in the Cairn India share price, and the target price rises alongside this from 275p to 300p.

Shares in the group closed at 283.6p on Wednesday, down 0.1p or 0.04%.

Key stats
Market capitalisation	£6,999m
No. of shares out	1,204m
No. of shares floating	1,119m
No. of common shareholders	not stated
No. of employees	16135
Trading volume (10 day avg.)	4m
Turnover	£3,175m
Profit before tax	£402m
Earnings per share	33.45p
Cashflow per share	58.49p
Cash per share	-9,999,999.00p

*Correct as at 29 Aug 2012

JP Morgan upgrades Reed Elsevier

Mark O'Donnell, analyst at JP Morgan, has upgraded business information firm Reed Elsevier (REL.L) from 'neutral' to 'overweight', believing management have turned the corner and that the shares are beginning to re-rate.

The group's first-half results showed the management's restructuring efforts are bearing fruit, O'Donnell said, with all divisions moving in a positive direction. Communication is also improving, he said, with the appointment of a new chief financial officer resolving uncertainty.

O'Donnell said earnings estimates could yet be increased: 'We see a potential upgrade to well-underpinned estimates to follow later with improving organic growth (science, risk, exhibitions) and margins (RBI, legal), and further buyback potential (every £200 million adds +1% to earnings per share).'

The analyst's target price rises from 590p to 675p on the back of his increased earnings forecasts.

Shares in the group, which features in Citywire Top Stocks®, closed at 589p on Wednesday, up 11p or 1.9%.

Key stats
Market capitalisation	£2,806m
No. of shares out	499m
No. of shares floating	494m
No. of common shareholders	not stated
No. of employees	76670
Trading volume (10 day avg.)	1m
Turnover	£4,646m
Profit before tax	£175m
Earnings per share	35.08p
Cashflow per share	52.23p
Cash per share	51.23p

*Correct as at 29 Aug 2012

Canaccord trims target price for Serco

Julian Cater, analyst at Canaccord, has reduced his target price for international services business Serco (SRP.L) following what he called a weak set of interim results.

Over the past six months revenues hit £2.34 billion, up 4.3% on the same period of 2011. However, adjusted operating profit declined 7.4% owing to restructuring costs totalling £15.7 million.

Cater continues to expect the result to pick up in the second half of the year, and reiterated his 'buy' recommendation on the shares. 'Management has visibility on 98% of target 2012 revenues. As a minimum that implies 2H12 organic sales growth of about 3.5%,' he said.

Shares in the group, for which Cater has a target price of 700p, down from 720p previously, closed at 564.5p on Wednesday, up 2p or 0.36%.