Broker tips: Hargreaves Lansdown, Reckitt Benckiser, Greggs
Proposals from the government to shake-up the personal savings market are positive but the reaction they triggered in shares of Hargreaves Lansdown seems overdone, UBS said in a research note e-mailed to clients.
Financial Services
14,164.95
17:14 18/04/24
Food & Drug Retailers
3,682.87
17:14 18/04/24
FTSE 100
7,877.05
17:14 18/04/24
FTSE 250
19,450.67
17:14 18/04/24
FTSE 350
4,334.00
17:14 18/04/24
FTSE All-Share
4,290.02
16:54 18/04/24
Greggs
2,778.00p
16:35 18/04/24
Hargreaves Lansdown
734.20p
16:40 18/04/24
Household Goods & Home Construction
12,423.35
17:14 18/04/24
Reckitt Benckiser Group
4,139.00p
17:15 18/04/24
Allowing retirees to sell their annuities for cash would be positive for UK exposed asset managers and asset gatherers the Swiss broker believes.
However, asset managers may be asked to provide financial advice, whereas Hargreaves Lansdown is a non-advised player.
As well, going on the basis of the government’s own estimates the Bristol-based firm only stands to gain approximately 5% in assets under administration. It now administers £49bn of assets with roughly 56% of those in funds.
The lack of a banking license also means that HL will not be interested in offering the mooted new Help-to-Buy ISAs, which may in fact compete with shares and ISAs for flows, particularly from younger savers.
For all of the above reasons, analysts Gregory Simpson and Arnaud Giblat reiterated their recommendation to ‘sell’ and 12-month price target of 830p.
Reckitt Benckiser has had its rating raised to ‘overweight’ from ‘equalweight’ over at Morgan Stanley, as the stock is “one of the best risk/rewards” in the home and personal care sector.
The broker said that’s because of the launch of the Reckitt’s cost saving program, dubbed as ‘Supercharge’. The programme is an engine of sales and EBIT growth to 2017, said Morgan Stanley. “The market underestimates the potential for Supercharge to drive both top-line and EBIT growth from 2015, we argue,” said the bank.
“We expect the organisational streamlining that Supercharge entails to boost top-line growth as Reckitt better leverages scale with larger, more rapid innovation,” Morgan Stanley added.
Broker Berenberg has begun coverage of Greggs with a 'sell' recommendation on the fast food chain's shares as the market appears to be ignoring several potential risks ahead.
Greggs's recent strategy to focus on its core food-on-the-go market and improve the supply chain has been met with initial success, helping the company pick itself up after struggles in the face of new market entrants and the rapid expansion of other rivals.
But with the stock responding well to the improvement in business performance, analysts at the German bank believe risks still remain in the recovery story that are not being captured in the share price, which is now up 90% since July 2014.
The stock trades at 19.8 times forecast 2015 earnings versus UK food service peers on 21.9 times earnings.
Berenberg's UK food retail team say potential risks lie in the competitive nature of a market growing at circa 2-6% per year and driven by both like-for-like growth in existing sites and continued roll-outs of new sites from a plethora of competitors such as coffee shops, supermarket convenience stores, specialists and fast food operators.
Like-for-like comparisons are expected to become tougher through 2015, demanding more from the existing product offering.
Then, while the plan to refurbish stores and exit poorly performing ones has seen initial success, the analysts believe the net store additions will be limited in the coming years and will not contribute materially to top-line growth.
Finally, it is likely to be hard for the company to replicate the type of margin growth seen between 2013 and 2014 when EBIT margins rose 1.8% to 7.2%.