Date: Thursday 22 Jul 2010
Third quarter trading at pubs group Mitchells & Butlers was healthier than KBC Peel Hunt was expecting, prompting the broker to nudge up its full year earnings forecast.
Margins are running slightly ahead of the levels seen in the second half of last year, which caught KBC on the hop as it expected them to lag. As a result it has bumped up its full year adjusted pre-tax profit estimate to £162.1m from £159.1m and its adjusted earnings per share forecast to 28.3p from 27.8p.
The recent disposal of 52 lodges for a net £88m will dilute earnings by 3% next year but it should make bank facility renegotiations less painful and brings into view the prospect of a resumption of dividend payments. The company is set to review dividend policy at the end of the current financial year. KBC Peel Hunt predicts the company will pay a dividend of 7.5p next year.
The broker believes the shares are good value on a projected price/earnings ratio of 10.5 based on fiscal 2010 earnings estimates.
Panmure Gordon’s switch from “buy” to “hold” two days ahead of Autonomy’s poorly received second quarter results was prescient, and the broker has followed up the downgrade with a cut in its target price.
“This morning bears will be cheered by the cash collection (up 64%), but will doubtless talk up the lower gross margin,” suggests Panmure analyst George O’Connor.
“The outlook statement is in line with our expectations – whilst there are lots of drivers, Autonomy is not edging up guidance. A mix of lower gross margin, higher interest change and lower tax means trimming 2010E EPS [estimated earnings per share for 2010] from US125.9¢ to US119.4¢, with revenue cut from US$900m to US$898.4m,” the broker said.
The broker's price target has been cut from 2149p to 1975p.
KBC Peel Hunt, which has a sell recommendation on the shares, is concerned about apparent stagnation and expects to downgrade its full year earnings forecasts by between 5% and 10%.
“We estimate that after adjusting for one-offs, Autonomy failed to grow its core business in Q2 [second quarter] 2010. Margins were well below expectations, although cash conversion looked OK,” KBC analyst Paul Morland said.
“Extrapolating Q2 growth rates and allowing for one-off sales, we fail to see how the company can meet Q3 expectations. We therefore expect the shares to retreat and predict an acquisition very soon,” Morland concluded.
There was not much in Kingfisher’s trading statement to suggest there will be a change to consensus estimates for the current fiscal year, according to Singer Capital Markets.
Singer is going for full year profit before tax of £646m, slightly higher than market consensus of £639m. “Prior to speaking to management, we would expect these figures to remain unchanged today given the comments about meeting first half expectations. There are likely to be changes in the mix though given the contrasting performances in the UK and France,” the broker notes.
Margins are running slightly ahead of the levels seen in the second half of last year, which caught KBC on the hop as it expected them to lag. As a result it has bumped up its full year adjusted pre-tax profit estimate to £162.1m from £159.1m and its adjusted earnings per share forecast to 28.3p from 27.8p.
The recent disposal of 52 lodges for a net £88m will dilute earnings by 3% next year but it should make bank facility renegotiations less painful and brings into view the prospect of a resumption of dividend payments. The company is set to review dividend policy at the end of the current financial year. KBC Peel Hunt predicts the company will pay a dividend of 7.5p next year.
The broker believes the shares are good value on a projected price/earnings ratio of 10.5 based on fiscal 2010 earnings estimates.
Panmure Gordon’s switch from “buy” to “hold” two days ahead of Autonomy’s poorly received second quarter results was prescient, and the broker has followed up the downgrade with a cut in its target price.
“This morning bears will be cheered by the cash collection (up 64%), but will doubtless talk up the lower gross margin,” suggests Panmure analyst George O’Connor.
“The outlook statement is in line with our expectations – whilst there are lots of drivers, Autonomy is not edging up guidance. A mix of lower gross margin, higher interest change and lower tax means trimming 2010E EPS [estimated earnings per share for 2010] from US125.9¢ to US119.4¢, with revenue cut from US$900m to US$898.4m,” the broker said.
The broker's price target has been cut from 2149p to 1975p.
KBC Peel Hunt, which has a sell recommendation on the shares, is concerned about apparent stagnation and expects to downgrade its full year earnings forecasts by between 5% and 10%.
“We estimate that after adjusting for one-offs, Autonomy failed to grow its core business in Q2 [second quarter] 2010. Margins were well below expectations, although cash conversion looked OK,” KBC analyst Paul Morland said.
“Extrapolating Q2 growth rates and allowing for one-off sales, we fail to see how the company can meet Q3 expectations. We therefore expect the shares to retreat and predict an acquisition very soon,” Morland concluded.
There was not much in Kingfisher’s trading statement to suggest there will be a change to consensus estimates for the current fiscal year, according to Singer Capital Markets.
Singer is going for full year profit before tax of £646m, slightly higher than market consensus of £639m. “Prior to speaking to management, we would expect these figures to remain unchanged today given the comments about meeting first half expectations. There are likely to be changes in the mix though given the contrasting performances in the UK and France,” the broker notes.
Singer currently has its “fair value” recommendation on the shares under review.
“The stock trades on a PER [price/earnings ratio] of 11.3x to Jan’11 or 5.4x EV/EBITDA [enterprise value/earnings before interest, tax, depreciation and amortisation] . This still includes losses from China and the business remains under-potentialised in terms of earnings from its developing territories,” the broker maintains.
“The stock trades on a PER [price/earnings ratio] of 11.3x to Jan’11 or 5.4x EV/EBITDA [enterprise value/earnings before interest, tax, depreciation and amortisation] . This still includes losses from China and the business remains under-potentialised in terms of earnings from its developing territories,” the broker maintains.
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