Tag Archives: Liberum Capital

Business, Finance, Occupation & Industry

Should You Buy Carnival Today?

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By Royston Wild, The Motley Fool

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LONDON — Shares of cruise ship operator Carnival  have endured a torrid time in recent weeks, slipping 15% from mid-February’s near-two-year high of 2,628 pence to current levels. The company has continued to endure tough press headlines following the Costa Concordia disaster in Jan. 2012, with an engine room fire and subsequent marooning of passengers on its Carnival Triumph ship in February once again denting investor interest in the company.

However, I view recent weakness as an excellent buying opportunity. Indeed, Liberum Capital has placed a 3,000 pence price target on the stock, illustrating the stock‘s excellent upside potential.

Carnival sails back into profit
Carnival announced in last month’s first-quarter update that it swung into a net profit of $37 million from a net loss of $139 million during the corresponding period in 2012. However, the results were overshadowed by news of further mechanical failures at two of its other liners, raising fresh fears over hefty repair bills and effect on customer demand.

The firm advised that, although cumulative advance bookings for this year are behind those of the same point in 2012, bookings have picked up in recent weeks, helped by attractive price promotions. And over the long term, I expect Carnival to successfully negotiate its current travails and boost passenger numbers — Investec has penciled in a compound annual capacity growth rate of 3.7% through to 2016.

In particular, Carnival looks set to make further headway into promising emerging markets, especially in Southeast Asia, and the company announced yesterday that its Sapphire Princess ship will be based in Singapore from the end of 2014. The firm told AFP that it expects cruise liner passengers in Asia to rise from around 1 million currently to 7 million by the end of the decade.

Double-digit earnings growth anchors investment case
City forecasters expect earnings per share to bounce back in the year ending Nov. 2013 after last year’s disastrous 23% drop to 118 pence. Growth of 14% is expected this year, to 134 pence, before steaming 22% higher in 2014 to 164 pence.

The holiday specialists currently change hands on a P/E ratio of 16.6 and 13.6 for this year and next, providing a discount to a forward earnings multiple of 17.6 for the broader travel and leisure sector.

Despite Carnival‘s earnings pressure in 2012, the company still hiked its dividend 21% to 63.5 pence per share, and broker estimates expect this to continue rising in the medium term. Payouts of 73.3 pence and 82.8 pence are penciled in for 2013 and 2014, correspondingly, up 15% and 13% on an annual basis and providing yields of 3.3% and 3.7%.

Not only are dividends set to shoot above the 3.2% average yield for the FTSE 100, but this exciting dividend growth is also expected to remain well protected, with coverage of 1.8 times and two times for this year and next around the widely regarded security threshold of two times.

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Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Should I Buy Serco Group?

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By Harvey Jones, The Motley Fool

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LONDON — I’m window-shopping for shares again, and there are plenty of goodies for sale. Should I pop Serco Group  into my basket?

Serco soars
Prisons and hospital outsourcing company Serco Group is on a roll right now. Its share price is up 10% in the last month, after it reported a 27% rise in full-year profits for 2012 to 302 million pounds. The market understandably likes this stock right now. Should I buy it?

Recent performance is particularly impressive, because I would have expected Serco Group to struggle at the moment. It does a lot of outsourcing for the public sector, both in the U.K. and U.S., and with government budgets under pressure, its bottom line should be under pressure. It was certainly squeezed in the U.S., which makes up 20% of its sales, where federal government spending cuts knocked 14% off organic revenues. Serco more than offset these losses by winning a record 5.8 billion pounds of new global contracts, while its order book rose nearly 7% to 19.1 billion pounds. Group revenue rose 5.7% to around 4.9 billion pounds. The dividend was lifted 20% to 10.10 pence. Investors were understandably happy.

Emerging profits
I’m happy to see that Serco generates more than 45% of total group revenue outside the U.K., up from 40% in 2011. Its Australasian, Middle Eastern, Asian, and African operations posted organic growth of 22% last year, as management seeks superior growth prospects and wider margins in emerging markets. This also helps offset political risk in the U.K. While Serco has benefited from the coalition’s welfare reforms, it constantly risks political backlash. In 2011, it was pilloried for driving prisoners to court in black cabs, while last month, the National Audit Office recently accused Serco of fiddling figures to hit performance targets at its out-of-hours GP service in Cornwall. Given the political dangers and shrinking public sector budgets, I’m glad to see Serco looking farther afield.

With a 31 billion-pound pipeline of new projects, management has good reason to be confident about the future. The board is even bullish about the U.S. opportunities, although it did warn that investors should only expect “modest improvement” in organic growth this year. On a current yield of 1.7%, some investors may be hoping for more income (others will be glad to see Serco plough the money back into its business). But the recent 20% hike, covered a generous 4.2 times, suggests there is scope for further dividend growth as profits rise.

Watch and wait
Forecast earnings-per-share growth of 2% this year is disappointing, although it should rally to 10% in 2014. Revenues are expected to grow from 4.91 billion pounds in 2012 to 5.17 billion pounds this year and 5.47 billion pounds in 2014. Broker views are mixed. Credit Suisse is neutral, but JP Morgan Cazenove is overweight, and Liberum Capital and Espirito Santo both hail Serco a buy, the latter with a 7.10 pound target price. This stock looks …read more

Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Should I Buy BT Group for My ISA?

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By Royston Wild, The Motley Fool

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LONDON — I believe that BT Group‘s aggressive strategy to build its broadband and television portfolios should underpin solid growth over the long term.

The company operates a lucrative dividend policy, making it a great pick for your tax-efficient stocks and share ISA (just click here for more information on how to maximize returns from ISAs). In my opinion, BT‘s improving earnings potential should enable it to maintain its policy of generous shareholder payouts.

Broadband and television operations ratchet up
BT continues to build market share in the U.K. broadband market, and bolstered its weighty presence further following last month’s 4G services auction. The company forked out 186 million pounds for the license to 2 x 15 MHz at the 2.6 MHz range, a move designed to enhance its wireless broadband services and allow connectivity to more remote parts of the country.

Elsewhere, BT is stepping up the fight with consolidated services heavyweight British Sky Broadcasting by steadily buildings its television portfolio to offer a rival “triple play” package.

BT agreed to buy ESPN’s U.K. and Ireland television channels late last month in a bid to bolster its BT Sport package, which is due for launch this summer. The deal gives BT the broadcasting rights to a host of top-notch football competitions, including the FA Cup and UEFA Europa League, in addition to the 38 English Premier League matches it has already agreed to show over the next three seasons.

A recent survey by broker Liberum Capital suggested that BT is gaining more interest from potential customers, with 37% of respondents in February claiming that they would consider switching from Sky, up from 25% in October and 28% in July.

The broker anticipates new BT Vision subscriptions will jump from around 100,000 per year to 250,000, mainly on the back of BT‘s ability to substantially undercut Sky on a price basis.

Earnings on course to tread higher
City analysts expect earnings per share to maintain a steady ascent in coming years — a 5% forecast increase to 24.9 pence for the year ending March 2013 is anticipated to rise 1% to 25.1 pence in 2014, and 7% to 26.9 pence in 2015.

I reckon that the telecoms giant represents decent value for money at current prices. A P/E reading of 10.8 for this year is forecast to slip to 10.7 in 2014, before sliding to 10 during the following 12 months.

BT also looks a canny pick for income investors seeking to latch on to excellent prospective dividend growth. A projected yield of 3.5% for 2013 — matching the average payout yield for the FTSE 100 — is expected by City experts to accelerate to 4% and 4.5% in 2014 and 2015 respectively.

After slashing its dividend in 2009 due to heavy earnings pressure, the company has rebuilt its progressive dividend policy that is now safeguarded with much better dividend coverage. Meaty forecast coverage of 2.6 times for 2013 is expected to remain high at 2.4 times and 2.2 times for 2014 …read more
Source: FULL ARTICLE at DailyFinance