Monday 17 August 2015

Mindful Money’s weekly shares watch: Persimmon, Glencore & Imperial Tobacco

Otmane El Rhazi from Mindful Money » Shares.

Given the slow-down in property price growth over the past year shareholders will be keen to hear from Persimmon when the house-builder publishes its half-year results on Tuesday.

According to the latest statistics from Halifax, in July annual house price growth declined, albeit to a still robust 7.9%, from 9.6% in June. But the retreat brings house price inflation to its lowest level since December 2014.

But given Persimmon has enjoyed a 61% share price rise over the past 12 months, brokers feel the easy money may have already been made. For his part Graham Spooner, investment research analyst at The Share Centre has the group’s stock down as a ‘hold’.

Back in July the house-builder’s half year trading update saw it reporting a 12% increase in revenues to £1.34bn. The average selling price had risen by 4% to £195,000, with legal completions up 7% to 6,855 new homes in the period notes Keith Bowman, equity analyst, Hargreaves Lansdown Stockbrokers.

Looking to this week’s market report he says: “Pre-tax profit for the half year is forecast to have risen by around 21% to £254m, with current trading topping the agenda for investors. Prior to the announcement and with the company’s committal to returning surplus capital to shareholders pitted against a valuation seen by some analysts as “up with events”, consensus opinion currently points towards a ‘weak hold’.”

Sentiment towards FTSE 100 listed miner, Glencore, which has endured a 40% fall in its share price over the past six months is surprisingly more upbeat. The group reports its half year results on Wednesday and prior to the announcement, Spooner is calling the stock a ‘buy’.

He expects production figures to show increases across most commodities, but also for the continued fall in commodity prices to have a further impact on group revenues.

Spooner says: “China has shown further signs of weakness and it will therefore be interesting to see if management indicate any cutbacks in production intentions. The senior management have said that other companies should reconsider expansion programmes to stem commodity price falls. We expect the trading division to be one of the few positives in the commodities environment at the moment.”

Bowman asserts that falling commodity prices and concerns over the health of China’s commodity consuming economy will certainly provide the backdrop.

He adds: “Both the group’s traditional Mining and Marketing businesses are likely to have been pressured, with first half production proving mixed. Concerns regarding its investment grade credit rating and a possible need to scrap its 2016 dividend payment in order to protect the rating currently prevail.”

However, with the firm’s shares steeply down over the past six months, analyst opinion sees some potential opportunity as the consensus currently points towards a ‘cautious buy’.

Wednesday also sees Imperial Tobacco Group, up 8% over six months, deliver its third quarter trading update. Ahead of the report, the general broker view is that the shares are a ‘buy’, although this conviction was slightly more robust three months ago. As such the market will be keen to hear how trading has progressed since the interim results in May, especially in relation to volumes in growth markets which performed well in the first half.

Spooner who is calling the shares a ‘buy’ says: “In June, the $7.1bn acquisition of US assets from Lorillard and Reynolds American was completed, giving Imperial a 10% share of the cigarette market in the country. For income seeking investors the start of quarterly dividends in June was a welcome development and any news about future dividend payments will also be of interest.”

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