Date: Monday 09 Aug 2010
Panmure Gordon is upgrading its earnings forecasts for Aviva after much better than expected interim results from the insurance giant last week.
“On a market consistent embedded value (MCEV) operating profit basis we have increased 2010 forecast to £3,886m (+12%) from £3312m (-5%) driven by improvements in pretty much all areas of the business. This translates into us increasing our 2010/11F MCEV operating earnings per share by 20% and 12% respectively to 90.1p/share (75.2p) and 85.6p/share (76.4p),” Panmure analyst Barrie Cornes said.
The broker is also bumping up its dividend forecasts after Aviva upped its interim pay-out by 5.5% and showed better than expected cash generation.
Panmure Gordon now expects the current full year dividend will be 26.04p, having previously forecast 25.19p, while the 2011 dividend is now forecast to be 27.38p, versus previous expectations of 26.49p.
“There are a number of drivers that will impact on the final dividend according to the company and it is our view that whilst Aviva could pay a higher dividend we suspect that being one of the highest yielding stocks in the FTSE 100 at 6.9% it has little need to ahead of Solvency II and an improvement in economic conditions,” Cornes suggests.
The broker has reiterated its “buy” recommendation and has lifted its price target from 496p to 535p.
Last week’s results from Lloyds Banking Group showed the part-nationalised lender is making progress on all key issues, Nomura Securities believes.
“Impairments and the margin/revenue improved more quickly, which should lead to upgrades. The capital and funding positions also improved,” Nomura analyst Robert Law said.
The broker is maintaining its 80p target price and sticking with its “buy” recommendation. It continues to see further upside potential from the current valuation of 1.2 times tangible book value per share, compared with a sector average of 1.5.
“However, more significant strength would require markets to be prepared to discount the longer-term profitability targets and re-rate the shares to near the sector average. We regard this as premature, given the continuing balance sheet risks, notably in asset quality and funding,” Law said.
ITV’s interim results showed a marked improvement in financial performance, but it was the strategic review of new chief executive officer Adam Crozier that the market was most focused on, and Charles Stanley believes it remains unclear whether the new strategy can move the terrestrial broadcaster from ‘a story of managed to decline to one of sustained earnings growth.'
Charles Stanley is sticking with its “hold” recommendation for now as the shares look fairly valued. It awaits “further improvement in advertising trends or early signs that the new strategy is starting to deliver before turning more positive.”
“ITV remains a unique platform for advertisers to access mass audiences, has a world class TV production business and one of the world’s largest commercial TV programme archives. We are concerned, however, that revenues may remain under pressure from ongoing structural change in media markets and the antiquated regulatory regime,” said analyst Sam Hart.
“On a market consistent embedded value (MCEV) operating profit basis we have increased 2010 forecast to £3,886m (+12%) from £3312m (-5%) driven by improvements in pretty much all areas of the business. This translates into us increasing our 2010/11F MCEV operating earnings per share by 20% and 12% respectively to 90.1p/share (75.2p) and 85.6p/share (76.4p),” Panmure analyst Barrie Cornes said.
The broker is also bumping up its dividend forecasts after Aviva upped its interim pay-out by 5.5% and showed better than expected cash generation.
Panmure Gordon now expects the current full year dividend will be 26.04p, having previously forecast 25.19p, while the 2011 dividend is now forecast to be 27.38p, versus previous expectations of 26.49p.
“There are a number of drivers that will impact on the final dividend according to the company and it is our view that whilst Aviva could pay a higher dividend we suspect that being one of the highest yielding stocks in the FTSE 100 at 6.9% it has little need to ahead of Solvency II and an improvement in economic conditions,” Cornes suggests.
The broker has reiterated its “buy” recommendation and has lifted its price target from 496p to 535p.
Last week’s results from Lloyds Banking Group showed the part-nationalised lender is making progress on all key issues, Nomura Securities believes.
“Impairments and the margin/revenue improved more quickly, which should lead to upgrades. The capital and funding positions also improved,” Nomura analyst Robert Law said.
The broker is maintaining its 80p target price and sticking with its “buy” recommendation. It continues to see further upside potential from the current valuation of 1.2 times tangible book value per share, compared with a sector average of 1.5.
“However, more significant strength would require markets to be prepared to discount the longer-term profitability targets and re-rate the shares to near the sector average. We regard this as premature, given the continuing balance sheet risks, notably in asset quality and funding,” Law said.
ITV’s interim results showed a marked improvement in financial performance, but it was the strategic review of new chief executive officer Adam Crozier that the market was most focused on, and Charles Stanley believes it remains unclear whether the new strategy can move the terrestrial broadcaster from ‘a story of managed to decline to one of sustained earnings growth.'
Charles Stanley is sticking with its “hold” recommendation for now as the shares look fairly valued. It awaits “further improvement in advertising trends or early signs that the new strategy is starting to deliver before turning more positive.”
“ITV remains a unique platform for advertisers to access mass audiences, has a world class TV production business and one of the world’s largest commercial TV programme archives. We are concerned, however, that revenues may remain under pressure from ongoing structural change in media markets and the antiquated regulatory regime,” said analyst Sam Hart.
The broker has raised its 2010 earnings per share (EPS) forecast by 8% to 4.1p following the interim results, to reflect improved advertising revenue assumptions. In contrast, the forecast for 2011 EPS is cut by 3% to 5.0p, due to increased investment.
source:digitallook
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