Date: Thursday 17 Jun 2010
The market has given the thumbs down to results from WS Atkins but KBC Peel Hunt thinks the management has clearly delivered in a tough environment, though with the share price approaching the broker’s price target, KBC has shifted to a neutral position on the stock.The broker does not expect to make any changes to its headline earnings estimates though it may make some modest segmental changes.
KBC analyst Andrew Nussey notes that the outlook for the design and engineering firm remains “slightly cautious” but the “order book provides 54% visibility”.
“Despite still facing some challenging end markets Atkins enjoys a wide spread of clients and service lines. With the shares trading on 10.7x FY [fiscal year] 2011 estimates and 3.8% yield for sustained through the cycle growth – we see long term value. However, recent performance has brought the shares towards our near term target and we move our recommendation to Hold,” the broker said.
The target price is held at 750p.
Panmure Gordon has nudged up its price target from 614p to 620p for London based brewer and pubs group Fuller, Smith & Turner and upgraded its current year earnings estimates by around 2% after better than expected results last week.The rating is shifted down to “hold” from “buy”, however, as the share price approaches Panmure's target price.
“Fuller’s shares responded positively to the full-year results and with just 8% potential total shareholder return, we downgrade our recommendation to Hold. In the pub sector we prefer Punch Taverns (Buy, 113p PT [price target]), Mitchells & Butlers (Buy, 369p PT) and Wetherspoon (JD) (Buy, 594p PT)
The share price of business services firm Mouchel has halved over the last year, and shareholders may be ruing the board’s decision to reject a 294p per share offer from sector peer VT Group, but Numis Securities thinks the company could be about to turn a corner.
Accentuating the positive Numis observs that Mouchel “has attractive leading market positions and it is operating within its covenants.” The company is comfortable with net debt of around £85m for the year to July 2011 and in case of emergency there is always the prospect of selling off some of its sought after assets. Numis suggests the Water business, for instance, could be sold for £30m although the sale would dilute earnings in the short term.
On the downside, Numis says there are still doubts on forecast earnings for next year (the company is declining to give guidance), while the effects of the company’s restructuring plan and the effect of public sector spending cuts not yet known. The company is also still on the lookout for a new finance director (FD), which adds to uncertainty.
Nevertheless, the broker has upgraded the stock from “hold” to “add”, with a price target of 175p. “We are buyers on weakness as we believe shareholder pressure will increase to deliver value and that the assets are strategically attractive,” Numis analyst Francesca Raleigh said.Meanwhile, Panmure Gordon is sticking with its “buy” recommendation after having a chat with Mouchel’s management, though it has reduced its target price from 210p to 190p to reflect new uncertainty for the group in the wake of Wednesday’s trading update.
“The Mouchel share price has been very weak of late and the valuation is at the low end of the range. The shares continue to offer a 4% dividend yield, which we believe is attractive in the current climate. Medium-term the structural revenue drivers remain positive for the group,” Panmure analyst James Cooke believes.
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