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Broker tips: Johnson Matthey, Kingfisher, Fuller's
Tue, 06 Jan, 2009
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Broker tips: Johnson Matthey, Kingfisher, Fuller's
Fri, 21 Nov 2008, 12:48:00
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Related Market Prices
Name
Value
Percent
Change
Johnson Matthey
1084.00p
-3.30%
Fuller Smith and Turner
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+2.86%
Kingfisher
144.20p
+3.00%
Nitol Solar
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Autocatalyst provider <b>Johnson Matthey</b> is likely to be less bullish about its prospects when it declares interim results next Wednesday, given the dramatic collapse in the sales of new cars worldwide.<br /><br />"In June, management had referred to a strong start to the year, and forecast another good year of growth. However, much has changed since then, and while the structural driver of tightening legislation remains in place, others - such as high energy and metals prices - have reversed sharply," says JP Morgan analyst Neil Tyler.<br /><br />Tyler is forecasting revenue for the six months to 30 September of £2,801m, operating profit of £135.8m, profit before tax of £123.5m and earnings per share of 43p. It expects the company to leave the interim dividend unchanged at 10.9p.<br /><br />The poor state of the car market has prompted JP Morgan to cut its price target from 1400p to 1000p. <br /><br />"Long term, we view JM's business as offering solid structural growth, but remain Neutral until we gain better visibility over global automotive landscape upon which growth opportunities are based," the US bank said.<br /><br /><b>Kingfisher</b> has had its price target reduced by Morgan Stanley ahead of the DIY retailer's quarterly results next week. <br /><br />The US bank has cut its price target for Kingfisher from 125p to 96p, as the DIY market moves into the low point of its cycle. <br /><br />Morgan Stanley is forecasting a slow-down in the growth of sales in all of the B&Q group's major markets, while currency fluctuations are also likely to have a negative impact on earnings. <br /><br />MS has retained its "equal weight" rating on the stock. <br /><br />Broker KBC Peel Hunt reckons London beer group <b>Fuller's</b> heavy presence in the City of London will hurt its profits, as was the case in the last stock market slump in 2002. <br /><br />Following this morning's interim results KBC has provisionally downgraded its full-year pre-tax profit estimate by 6% to £21.5m, while the earnings per share forecast has been trimmed to 27.4p. <br /><br />For fiscal 2010 the broker is forecasting flat results, with the benefit of lower capital expenditure offset by cost increases and like-for-like sales declines, which KBC estimates will be in the region of 5%. <br /><br />In comparing the company to its rival, Young & Co., KBC observes that Fuller's trading is more exposed to regional southern England and the City than Youngs. <br /><br />"While therefore Fuller's also represents quality in the pubco sector and has a strong balance sheet that would be the envy of others, we prefer <b>Young's</b> for choice," analyst Paul Hickman said.
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