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The Expert View: Bunzl, Capita and Segro

Our daily roundup of analyst commentary on shares, also including Pendragon and Countryside Properties.

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To see all the slides on the same page, click here

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Key stats
Dividend yield 2%
Market capitalisation £7,726m
No. of shares out 337m
No. of shares floating 333m
No. of employees 18,846
Trading volume (10 day avg.) 0.9m
Turnover £9,079m
Profit before tax £645m
Earnings per share 97.78p
Cashflow per share 140.82p
Cash per share 141.99p

Share Centre: put on your Bunzl hard hats

Typically reliable Bunzl (BNZL) hit the buffers after its first quarter update and investors could be in for some turbulence, says The Share Centre.

Analyst Graham Spooner said the stock was still a ‘long-term ‘buy’’ despite the ‘normally reliable and defensive Bunzl’ reporting a slowdown in US sales, which worried investors as around 58% of revenue is derived from the region. The shares slumped 8.7% to £23.29 on the news.

Spooner said the company, which provides a range of everyday products from food packaging to safety equipment, had seen revenues slow across the board due to macroeconomic concerns and market conditions.

‘With the shares pre-update close to an all-time high, any sign of turbulence was likely to hit the shares hard,’ said Spooner.

‘Investors may have to put on the company’s safety hats for a period of time, but longer term attractions remain.’

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Key stats
Dividend yield 0%
Market capitalisation £2,149m
No. of shares out 1,668m
No. of shares floating 1,651m
No. of employees 65,902
Trading volume (10 day avg.) 3.3m
Turnover £3,918m
Profit before tax £545m
Earnings per share 17.77p
Cashflow per share 30.24p
Cash per share 57.40p

Capita in an ‘uneasy’ spot, says Jefferies

Jefferies believes Capita’s (CPI) position is ‘uneasy’ as it is still trading on a low valuation and its recovery is uncertain.

Analyst Kean Marden retained his ‘buy’ recommendation and target price of 180p on the outsourcing giant. The shares were trading at 129.6p yesterday.

‘Capita continues to offer an uneasy combination of low valuation and uncertain recovery,’ he said.

‘One year into the turnaround, the group has echoed the overconfident revenue and margin guidance experienced by peers but the trajectory now looks more realistic and the software order book has stabilised.’

He added that the 10% earnings margin and £200 million free cashflow targets were  ‘back-end weighted by ultimately achievable’.

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Key stats
Dividend yield 2.8%
Market capitalisation £7,282m
No. of shares out 1,085m
No. of shares floating 1,079m
No. of employees 308
Trading volume (10 day avg.) 1.9m
Turnover £369m
Profit before tax £200m
Earnings per share 104.75p
Cashflow per share 105.38p
Cash per share 7.72p

Segro on a justified premium, says Liberum

Industrial real estate investment trust Segro (SGRO) is seeing strong demand which shows the advantage of its urban assets, says Liberum.

Analyst James Ashley retained his ‘buy’ recommendation and target price of 750p on the shares, which fell 1.3% to 673p yesterday.

First quarter lettings were strong and vacancies were reduced, with rents on renewal and review securing an additional £21.2 million.

‘Good demand continues to support development activity...The first quarter performance was achieved despite moderating economic activity across Europe and an increasing supply response in the UK, highlighting Segro’s advantageous weightings to urban assets and a substantial development pipeline,’ said Ashley.

‘We expect Segro to generate 8.8% total returns in full year 2019 and as a result, the shares trade at a justified premium.’

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Key stats
Dividend yield 6%
Market capitalisation £326m
No. of shares out 1,397m
No. of shares floating 1,166m
No. of employees 9,989
Trading volume (10 day avg.) 0.6m
Turnover £4,149m
Profit before tax £85m
Earnings per share -4.06p
Cashflow per share -2.11p
Cash per share 3.67p

Pendragon profit warning is ‘miserable news’, says AJ Bell

Used car dealer Pendragon (PDG) has launched a review in the wake of a profit warning, which will put the brakes on a rally in the shares, says AJ Bell.

Analyst Russ Mould said ‘you know a profit warning is bad when a company launches a review’ as margin pressure saw the business report a first quarter loss. Earnings were ‘considerably below’ expectations as UK consumers are reluctant to splash out amidst political and economic uncertainty.

‘Investors can take a little comfort from the growth in lucrative after-sales work but otherwise this is pretty miserable news which is likely to firmly put the brakes on a year-to-date rally in the shares,’ said Mould.

The shares fell 6.8% to 23.5p yesterday.

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Key stats
Dividend yield 3.4%
Market capitalisation £1,529m
No. of shares out 450m
No. of shares floating 431m
No. of employees 1,557
Trading volume (10 day avg.) 0.7m
Turnover £1,019m
Profit before tax £167m
Earnings per share 32.61p
Cashflow per share 34.46p
Cash per share 10.49p

Countryside Properties looks good value, says Peel Hunt

Countryside Properties (CSPC) has delivered a ‘reassuring’ update and Peel Hunt says the property developer represents ‘good value’.

Analyst Gavin Jago retained his ‘buy’ recommendation and target price of 375p on the stock after ‘healthier’ second quarter trading on the back of a ‘disappointing start’ to the year.

‘The shares have lagged the sector by 20% in the last three months on fears over forecasts,’ he said.

‘These should be allayed and we should see a catch-up on the share price for the next few months. We continue to believe the group’s mix of partnership and private housing will deliver robust medium term growth and strong returns.’

The shares jumped 6.7% to 341.6p yesterday.

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