What's in store today...
Seymour Pierce has a ‘buy’ recommendation on both Rexam (REX) and Travis Perkins (TPK).
"Recent trading updates from global peers has underlined the resilience of the global beverage can market," it pointed out regarding the former.
In its last trading update in November, chief executive Graham Chipchase stated that "at this early stage, we expect 2012 to be a year of further progress". At that time, the European beverage can business had not been impacted by a eurozone recession.
Charles Stanley’s analyst, Mark Shepard, believes that this remains a risk. Nevertheless, he has an ‘accumulate’ recommendation on the stock around the 2012 outlook, stating that the stock’s valuation looked "reasonably attractive" on a 2012 price to earnings ratio of between 10 and 11 times.
Seymour’s positive stance on Travis Perkins comes from the fact that valuation remains "undemanding" on a 2012 price to earnings ratio of about nine times. Additionally, Seymour Pierce believes that Travis Perkins will have continued with its market share gains.
However, the broker is negative on Hays (HAS). With a net fee income growth of 8% already announced for the half year, Seymour Pierce believes that the focus will be on conversion rations and the ability, or not, for the company to continue paying its uncovered dividend.
About 31% of Hays’ net fees are generated in Asia Pacific, 33% in Continental Europe & Rest of World and 36% in the UK & Ireland. Sequentially, growth in Asia Pacific slowed from 21% in the first quarter to 11% in the second quarter, while Continental Europe’s growth slowed from 34% in the first quarter to 20% in the second. UK profitability is also like to be a worry, with the second quarter seeing an accelerated fee decline to -7% from -4% in the first quarter.
Shepard believes that investors may have begun to view Hays as a cyclical recovery play as shares in the company have risen by more than 20% over the past month.
However, he was less encouraged by this view, saying that he maintained his ‘hold’ recommendation until there was roadmap to improve UK profitability.
Following a very strong trading statement last month, Panmure Gordon’s analyst, Mark Hughes, is confident that not only will Galliford Try (GFRD) report a "strong" set of first half interim results, but that it will upgrade full year forecasts.
He forecasts a pre-tax profit of £25.5 million, with net debt coming in at £70 million.
The stock is the most undervalued stock in the sector, trading on a 2012 price to earnings ratio of about 8.5 times, a 45% discount to the sector. The stock also offers a dividend yield of about 4.5%.
A positive trading update is also expected from housebuilder Barratt Developments (BDEV).
Rachael Waring, analyst at Panmure Gordon, is expecting the group to report 5,198 completions, up 8% year-on-year, with pre-tax profits coming in at £90.5 million. Additionally, she noted that the company’s stock on loan had reduced from 12.32% at the start of the year to 9.08% this week.
However, she pointed out that debt was likely to have increased to around £550 million due to the timing of land creditor payments.
Despite the share price having had a strong run year-to-date, up more than 30%, Waring believes that the stock has "further to go". The stock is currently trading on a PNAV of 0.56 times.
In economic data, Wednesday will see the release of the minutes of the February meeting of the Bank of England's Monetary Policy Committee (MPC), when the decision was taken to enact a further £50 billion of quantitative easing (QE) was taken. It was also decided to keep interest rates down at the record low level of 0.50%, where they have stood since March 2009.
Howard Archer, chief UK and European economist at IHS Global Insight, states that what will be "crucial" about the minutes is whether or not all nine MPC members were in favour of the £50 billion extension to QE. "If there were any MPC members against extending the QE programme in February, it will fuel speculation that this could be the last stimulus for the economy from the Bank of England barring another marked downturn in the economy," he warned.
Victoria Cadman, economist at Investec, suspects that the balance of views at last week’s discussion was less unanimous than in October when the MPC last sanctioned further QE. "Indeed, at least a couple of members may have toyed with an ‘on hold’ vote on this basis, although we suspect that on balance any borderline members would have sat in line with the Committee quorum for the vote itself," she stated.
Archer believes that additional QE is more likely than not, predicting that the Bank of England will do £25 billion more QE in May and another £25 billion in August. Additionally, he is predicting that interest rates will not rise until "at least late-2013 and could very well stay put at 0.50% until 2014".
Trading update
Logica, St James’s Place, Galliford Try, Filtrona, Millenium & Copthorne Hotels, Anglo Pacific Group, London Capital Group Holdings, Barratt Developments, Law Debenture Corp, Travis Perkins, Temple Bar Investment Trust, Rexam, Micro Focus International, Hays, Dialog Semiconductor
AGM/EGM/Special Meetings
Gooch and Housego
