Companies: IOT    NXT    SUY   

Numis, proffering negative views on three stocks this month, reserves its most scathing comments for sofa retailer ScS. Analysts Steve Davies and Ramona Tipnis further downgraded their already low pre-tax profit forecast – from £12 million to £6 million – following a nine per cent like-for-like sales deterioration for the first half of the year.

Turnover was up on the previous year due to a robust store-opening programme. However, this exacerbated the already weak trading environment by adding logistical and distribution issues into the mix. On the positive side, the team concedes that the share price could receive some support from a maintained dividend of 17.5p and the possibility of a ‘take-private transaction at, say, 270p’. Targeting a price of 190p versus the current 277p, the recommendation is sell.

The retail team affixed the same bearish recommendation to Next, which ‘still has much to do to get like-for-likes into positive territory in a tough market’. Sales slowed for the 15 weeks to 12 May, as new store contributions proved sluggish and recent double-digit growth at the directory arm suffered a ‘significant slowdown’. The broker’s 1820p target represents a significant discount on the current 2250p, as Numis struggles ‘to see why Next merits its current multiple of 15 times when M&S, with £5 billion of freehold assets and a much greater exposure to the fast-growing food market, trades on 16.5 times forecasts for 2008’.

Lastly, healthcare software specialist iSOFT is worth selling ahead of the offer from Australian rival IBA, with Numis ‘concerned about some of IBA’s historic and current deals, as well as what we consider to be some weaknesses in disclosure’. IBA’s recent strong performance ‘may prove difficult to repeat’.