Search Share Prices
Broker tips: De La Rue, Intertek, Whitbread
(WebFG News) - Analysts at JP Morgan on Wednesday reiterated an 'overweight' rating of British banknote manufacturer De La Rue on the basis that its expected dividend implies an "attractive" 5% yield.
Despite the continued 'overweight' rating, the analysts did lower their target price for shares in De La Rue from 700p to 600p, citing downwards revisions to their near-term operating profit forecasts for the company and "an adjustment to the list of peers in our Sum-Of-The-Parts valuation".
Basingstoke-based De La Rue engages in banknote manufacturing, security printing of passports and tax stamps, brand authentication and paper-making.
The investment bank's estimate of De La Rue's underlying operating profit in fiscal year 2018 dropped from £71.1m to £62.5m.
Intertek was under the cosh on Wednesday as Credit Suisse cut its stance on the stock 'underperform' from 'neutral' and slashed the price target to 4,600p from 5,450p to reflect slightly lower near-term forecasts and an increased risk in the testing sector.
CS said it expects Intertek's organic growth, along with that of other testing companies, to improve through FY18 and FY19 as resource markets improve. In addition, it reckons Intertek can grow earnings before interest, tax and amortisation margins, maintain good cash conversation and use excess cash for incremental M&A.
"While all positive, we think that the rate of change for margin growth will slow following the particularly strong 2016-2017 performance and will be slower than at either SGS Surveillance or Bureau Veritas. We also expect cash conversion to normalise as capex increases and working capital outflows returns.
"Intertek is a strong company, in our view, with growing profits and cash flow. Relative to other quality growth stocks, however, we think the combination of slower earnings growth and premium valuation means the risk and reward is relatively less attractive at this point."
Analysts at Canaccord Genuity bought into Whitbread's announced de-merger with its Costa Coffee arm, arguing that there were no synergies to be had from keeping the two together.
Indeed, if management at either slipped-up, there would be plenty of suitors about to prop-up the two companies' shares, they said.
"We already expect the management teams of IHG, Marriott, and Accor to be doing their homework," they added, saying they remained 'buyers' of the shares.
Despite the funding shortfall in Costa's pensions, they also believed a de-merger was possible in less than the two year timeline outlined by the company.
Until a de-merger was concluded, the Canadian broker said, Whitbread had the "opportunity to turn interesting international bridgeheads into material growth opportunities for both Premier Inn and Costa," in reference to Germany and China, respectively.
Back on the subject of the company's pension liability, Canaccord pointed to the £4bn-plus of freehold asset on the balance sheet - mostly at Premier Inn - and its low net debt-to-EBITDA ratio of 1.1 as reasons why it would expect the pension liability and the majority of the debt to be retained in Premier Inn.
Canaccord kept its target price for the shares at 4,500p but mooted a potential break-up price of 5,200p.