Check out this week's most popular equity research
Companies: BMS, BT/A, CRTA, DGE, FEVR, HCHOF, 73S, VLG
Growth Prospects in Healthcare
Sector note | Panmure Gordon, 26 January
"We expect the volatility of the last 3 months to continue, with macro events, particularly the uncertainty brought by President Trump and his focus on pharma pricing and dismantling the Affordable Care Act, likely to keep healthcare in the headlines for the wrong reasons. We believe the more highly valued larger stocks are likely to struggle to break out to new trading levels but note there remains good value within the smaller end of the sector for stockpickers, with company-specific events likely to drive some stocks well ahead of the crowd..."
Driving distribution – price target raised
Fevertree Drinks Plc (FEVR) | Whitman Howard, 26 January
"Fever Tree’s (FEVR LN, HOLD, T/P 1250p) strong second half trading statement and clear ability to drive distribution forward this calendar year prompts us to upgrade both our full year 2016 and 2017 forecasts as well as raise our price target from 1080p to 1250p, which implies a full valuation for now..."
H1: growth momentum maintained in all markets
Diageo (DGE) | AlphaValue, 26 January
"H1 update: organic volumes were up +1.8% (cons. +2%) whereas net sales grew organically +4.4% (cons. 3.1%, AV +4.1%) with the price/mix at +2.7%. On a reported basis, net sales were up +15% (FX: 15.2%). Organic net sales by region: North America +3% (cons. +3.2%), Europe +5% (cons. +3.1%), Africa +4% (cons. +4%), LatAm +11% (cons. +2%), and Asia Pacific +3% (cons. +3.5%). Organic volume growth by region: North America +1%, Europe +3%, Africa +3%, LatAm +0%, Asia Pacific +2%. The operating margin for the period was up 150bp on reported basis (to 32.6% vs. cons. 31.4%) and flat organically. The profit attributable to shareholders is up +8% to $1,514m. The interim dividend is 23.7p (+5% yoy). The group maintains its guidance of mid single-digit top-line growth and a 100bp improvement in the organic operating margin in the three years ending 30 June FY19..."
Safestyle UK Plc (SFE) | Zeus Capital, 23 January
"Today’s trading update highlights that 2016 has been another good year for Safestyle reporting record revenue, that will translate into record profitability, and continuing to take market share. Revenue of £163.5m (FY15: £148.9m) is broadly in line with the ZC estimate of £165.0. Profitability is in line with management expectations and will be in line with consensus and the ZC estimate of £20.2m. Safestyle has grown revenue and profit by c. 10.0% and c. 15.0%, respectively, during FY16. This level of growth looks to be at the upper end of the peer group’s performance in a year when the sector has had to deal with the continuing difficult RMI market and input price pressures, as raw material costs increase. Safestyle’s best in class performance has been reflected in the share price which is trading near all-time highs at 311.75p. Despite this, the FY17 PER multiple of 15.3x does not look stretched when taking into account the competitive position of the business in its market and the potential for further cash returns..."
Hotel Chocolat Group Plc (HOTC) | finnCap, 27 January
"We initiate on Hotel Chocolat with a 270p price target and Hold rating. While the investment case is attractive, capturing production efficiencies accounts for half of the 21% PBT CAGR forecast to FY19E. Any slippage in the timing of related capital projects or resulting production disruption could weigh on the stock, which at 37x forward earnings is, in our view, priced for perfection. With the share price up 90% since IPO last year, we suggest investors await a more favourable entry point..."
WANdisco Plc (WAND) | Edison, 23 January
"WANdisco’s performance in H2 indicates that its investment in creating a platform for scalable growth is starting to reap returns. H2 bookings grew by 109%, costs reduced and in Q4 the company operated at close to cash-flow break even. The pipeline entering FY17 is strong and with three major tech partners – IBM, Oracle and Amazon – now generating sales, WANdisco looks exceptionally well placed to continue benefitting from the growth in cloud storage and big data..."
Braemar Shipping Services Plc (BMS) | Edison, 24 January
"While the shipbroking activity continues to trade in line with expectations, weakness in the oil & gas market has continued to adversely impact the Technical division. Corrective actions have been accelerated, with £6m of benefit expected in FY18. FY17 EBIT guidance is cut to £3-3.5m and the reduced dividend should more closely reflect the underlying earnings potential, with an historic yield of 5.7% likely to build as earnings recover..."
A Year of Maiden Profitability
Venture Life Group Plc (VLG) | Equity Development, 26 January
"Venture Life Group manages a growing portfolio of non-prescription healthcare brands focused on ageing consumers, supported by its integrated product development and manufacturing model. The shares trade on a low multiple, particularly given that VLG will report positive EBITDA in 2016, has revenue momentum and prospects of near-term, self-sustaining profitability..."
WANdisco Plc (WAND) | Progressive Equity Research, 26 January
"Following our notes on WANdisco in July and August (which focused on the IBM relationship and the Smart City deal) this brief comment summarises how the group has fared during 2016 and sets the scene for 2017. Alongside the major agreement with IBM, WANdisco produced encouraging interim results, announced significant contract wins and raised new equity. We highlight good arket engagement in the form of new contracts and note the record bookings and excellent progress towards its target of neutralising the monthly cash burn during Q4. The group ended 2016 with net cash of U$7.6 million, a strong order book and good sales pipeline..."
BT, Profits Warning, But Dividend Maintained
BT Group (BT/) | Beaufort Securities, 25 January
"BT Group PLC (BT.A) reported a very unexpected profits warning this morning, coming from two sources. Firstly, management has uncovered “specific accounting manipulation” in its Italian business, covering “many people over a number of years”. Secondly, the outlook for BT’s UK public sector and International corporate markets has deteriorated which will manifest itself in Q4 and beyond. On the positive side, BT’s free cash flow (FCF) outlook remains high enough to allow BT to maintain its 10% dividend growth guidance for fiscal year’s 2017 and 2018. BT will report its Q3 results this Friday, so there will be more clarity on these issues, but with the stock now trading on only 5.6x FY-18 EV/EBITDA and yielding 5.4%, we retain our Buy recommendation with Target Price now 360p (previously 440p)..."
