The Expert View: Sportingbet, Imperial Tobacco and Xcite Energy

Our daily round-up of analyst recommendations and commentary, featuring Sportingbet, Imperial Tobacco, Xcite Energy, Booker and Moss Bros.

Key stats
Market capitalisation	£350m
No. of shares out	667m
No. of shares floating	508m
No. of common shareholders	not stated
No. of employees	630
Trading volume (10 day avg.)	5m
Turnover	£206m
Profit before tax	£21m
Earnings per share	3.88p
Cashflow per share	6.38p
Cash per share	17.23p

*Correct as at 20 Sep 2012

Peel Hunt downgrades Sportingbet as shares soar on takeover hopes

Nick Batram, analyst at Peel Hunt, has downgraded online gambling outfit Sportingbet (SBT.L) to 'hold' from 'buy' amid news that William Hill and Aim-listed GVC Holdings are considering making an offer for the business.

Sportingbet shares have gained more than 90% over the past four months amid ongoing bid rumours, and gained 16.6% on Wednesday on this latest development.

Valuing Sportingbet will be far from straightforward Batram said given the differing fortunes of its operations in different countries, but he said 60-70p per share seems reasonable.

However, Ivor Jones, gaming analyst at Numis, previously said a buyer might have to pay up to £1 a share. William Hill and GVC have not yet commented on the possible value of their bid.

The analyst said Sportingbet now looks to be 'firmly in play' with other bidders (including Betfair) doubtless appraising the situation. However, investors holding out for an auction are playing a risky game, he warned: 'If the bid comes to nothing, then the shares are likely to fall back to the 40p level. Therefore, at the current time a Hold looks an appropriate recommendation.'

Shares in the group closed at 51.25p on Thursday, up 0.25p or 0.49%.

Key stats
Market capitalisation	£23,394m
No. of shares out	991m
No. of shares floating	913m
No. of common shareholders	not stated
No. of employees	38200
Trading volume (10 day avg.)	4m
Turnover	£29,223m
Profit before tax	£1,796m
Earnings per share	176.77p
Cashflow per share	234.94p
Cash per share	115.83p

*Correct as at 20 Sep 2012

Canaccord reiterates 'buy' on Imperial Tobacco

Eddy Hargreaves, analyst at Canaccord, has reiterated his 'buy' recommendation on Imperial Tobacco (IMT.L) following news that the group is once again on track to meet market expectations.

The trading update said revenues are expected to rise 4% over the year in spite of sales falling by up to 3% as a result of tough trading conditions in the Ukraine and Poland on top of troublesome international trade sanctions against Syria.

'The usual lack of decimals in the two (only) growth rates disclosed provides fodder for both bulls and bears,' Hargreaves said. 'We consider the overall tone to be fairly positive.'

The analyst said that although the shares have suffered recently amid plain packaging rules and public smoking bans he believes they are too cheap on a medium-term view. He added that he ascribes no value to a potential acquisition of Imperial, believing such a deal is possible but unlikely in the short term.

Shares in the group closed at £23.99 on Thursday, up 63p or 2.7%.

Key stats
Market capitalisation	£330m
No. of shares out	278m
No. of shares floating	239m
No. of common shareholders	not stated
No. of employees	18
Trading volume (10 day avg.)	7m
Turnover	£0m
Profit before tax	£0m
Earnings per share	0.07p
Cashflow per share	0.10p
Cash per share	31.13p

*Correct as at 20 Sep 2012

Seymour Pierce says 'buy' Xcite Energy

Sam Wahab, analyst at Seymour Pierce, has reiterated his 'buy' recommendation on North Sea oil explorer Xcite Energy (XEL.L) on news of a successful initial test of its Bentley oil well.

The Aberdeen-based company said the results of the test exceeded expectations, having produced around 147,000 barrels of oil. The positive news spurred rumours of a partner buying into the prospect to develop the field further.

Wahab said the shares should rise on the development: 'Whilst today’s announcement is largely priced in given Xcite’s ongoing operational news flow to date, we expect investors to react positively to further confirmation of the successful programme.

'The shares have rallied in recent weeks as the market anticipates a potential farm-in partner on the back of encouraging flow test data. Today’s announcement highlights the attractiveness of the Bentley field. On this basis, we expect the shares to continue to strengthen today.' His prediction proved not to be correct, however, with the shares heading south shortly after the announcement.

Shares in the group, which feature in Citywire Top Stocks®, closed at 106.5p on Thursday, down 21.5p or 16.48%.

Key stats
Market capitalisation	£1,486m
No. of shares out	1,568m
No. of shares floating	1,365m
No. of common shareholders	not stated
No. of employees	9375
Trading volume (10 day avg.)	2m
Turnover	£3,933m
Profit before tax	£75m
Earnings per share	4.74p
Cashflow per share	5.55p
Cash per share	4.05p

*Correct as at 20 Sep 2012

Shore Capital sticks with 'sell' on Booker

Clive Black, analyst at Shore Capital, has reiterated his 'sell' recommendation on groceries wholesaler Booker (BOK.L) in spite of what he said was a good all-round performance in the latest quarter because of the high price of the shares.

In the 12 weeks to 14 September total sales (excluding Makro, a UK rival it is acquiring) rose 4.3% on the same period last year. On a like-for-like basis total sales rose by 4.4%, non-tobacco sales by 3.8% and tobacco sales by 5.4%.

'Booker has delivered another very robust trading performance set against the backdrop of a very poor UK consumer economy,' Black said.

The analyst said the Office of Fair Trading's verdict on Booker's planned takeover of Makro remains a big unknown for shareholders. 'Such a review is always hard to pre-judge albeit we would expect the majority if not all of the of transaction to proceed as planned. This process prevents the commencement of formal integration, which is a frustration of sorts but has to be done.'

Although Black said he's a big fan of Booker, the shares are too rich to warrant a better recommendation: 'we feel the performance and short-to-medium term potential of the business is reflected in the price; indeed materially so'.

Shares in the group closed at 94.65p on Thursday, down 1.1p or 1.15%.

Key stats
Market capitalisation	£45m
No. of shares out	99m
No. of shares floating	69m
No. of common shareholders	not stated
No. of employees	976
Trading volume (10 day avg.)	0m
Turnover	£101m
Profit before tax	£2m
Earnings per share	1.53p
Cashflow per share	6.61p
Cash per share	24.68p

*Correct as at 20 Sep 2012

WH Ireland cheers progress at Moss Bros

John Cummins, analyst at WH Ireland, has reiterated his 'buy' recommendation on menswear retailer Moss Bros (MOSB.L) following a set of interim results he believes show progress on the strategy.

In the first half of the year like-for-like sales rose 5.7%, with retail up 6.5% and rentals up 2.6% as a result of people deferring their weddings to avoid missing the Olympics, Cummins said. Management expect this to be recouped in the second half.

Cummins said the company's solid balance sheet should encourage shareholders. 'Backed by net cash of £26.2 million and back on the dividend list, we see further scope for forecasts to be raised as the strategy progresses.

'Given that the refurbishment programme should be funded through free cash generated bythe business, the potential to return cash to shareholders remains a possibility. Wemaintain our Buy recommendation and 60p share price target.'

Shares in the group closed at 46.25p on Thursday, up 1.25p or 2.78%.