2 September 2010

Brokers' Views: Charles Stanley

Pulling no punches

29/06/2009

Charles Stanley pulls no punches in its analysis of heavily indebted pubs play Punch Taverns, which recently announced a £350 million cash call to curb its debt mountain. Analyst James Dawson retains his negative stance on the company, which continues to be ‘driven by a strong
cash realisation programme’.

With regard to Punch, whose recent trading update flagged up ongoing tough trading amid weak consumer confidence, Dawson points out that margins ‘within the managed houses business will not bounce back quickly’, among other concerns. Accordingly, he retains his 115p price target and sell recommendation.

Two to add

Meanwhile, add recommendations were slapped on both Kewill and TEG Group. Annual figures from Kewill, the supply chain software specialist, came in ‘slightly ahead of our expectations’, with operating profits of £7.5 million, up eight per cent year-on-year, beating the broker’s £7.2 million estimate. Currency benefits, as well as compliance issues and a star turn in Germany, drove growth. Leaving its 80p price target unaltered, versus the current 73p market price, Charles Stanley moves its stance from buy to add in the wake of a strong recent price showing.

AIM-traded TEG meanwhile, received its add stance following news of the acquisition of composting technology peer Banham Compost for £3.1 million in a deal funded through a £1.9 million placing at a discounted 40p and the assumption of a £1.3 million asset finance loan. Regarding the deal as a ‘sensible medium-term move’, analyst Richard Hickinbotham has a 58p target for the shares, currently 48.5p.

Tags: Buy/Hold , Debt , Mergers & acquisitions , Sell/avoid

Companies: Punch Taverns , Kewill , TEG

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