Insights for January 2016

Post an insight
Posted by ShrutiAggarwal on 27 January 2016, 7:41 AM

M & S , Challenging trading conditions

Marks and spencer (M&S) is one of the leading UK’s retailors with over 1330 stores worldwide. The Company has over 798 stores across the United Kingdom in high streets and retail parks, as well as stations, airports and other locations ranging from out-of-town and flagship stores of over 100,000 square feet to Simply Food stores of around 7,000 square feet. The Company has over 455 international stores in 54 territories across Europe. M&S is a ‘Hold’ with a potential upside of up to 20% from the current levels.  According to the data from yahoo finance, the stock has a forward P/E of 15.96 compared to FTSE100 forward P/E of 13.37. The stock has a trailing P/E of 13.87. It finished trading on London stock exchange on Monday 25th January at 420 pence a share. However as per the analysis of stock’s forward P/E compared to FTSE 100 P/E, the stock seems slightly overpriced, that’s why we don’t see much upside in M& S from the current price levels.

M&S has mainly 2 divisions i.e. Food and general merchandise. 57% of the revenue attributes to the food division and rest of the revenue comes from general merchandise. Currently, the stock has been trading below 20 days and 50 day moving average of 432.7 pence and 467.7 pence respectively. However, the stock prices have stumbled a lot post November and they have come down from 540 pence to 410 pence lately. But, now it seems that stock prices have started consolidating at the current levels and we see the prices range bound between 420 p – 450 p in the near future. The stock would face resistance at 440 pence and the next resistance is seen at 457 pence. However, the stock seems to have very strong support at 410 pence and in case of stock breakdown below 410 pence, it will be an alarming signal for the bulls and they need to hedge their positions or trade with a strict stop loss. M&S has a consensus rating of ‘Hold’ and an average target price of 534 pence. However, our target price is slightly below the consensus target price which would be discussed in the later part of the article. (Read more)

Other Insights on Related Shares: MKS.L

It is something of a cliché, during a period of intense volatility such as the present one, for investors weary of an incoming crisis to seek refuge in what is perceived as the safest asset class of them all – gold. This tends to hold true even when commodity prices are falling as in the current situation. However there are ways to invest in gold without accumulating huge bars of the shiny metal in the basement, which are safer and more convenient than owning bullion and carry the possibility of capital gains. Listed gold mining companies are often described as a “safe haven”, and present a “golden” opportunity for investment. (Read more)

Topics: Commodities, Gold
Other Insights on Related Shares: GOLD.L, RRS.L

Easyjet has had a very up and down year on the market, having a 52-week range of 1,521.00 – 1,929.00 and losing 20% of its value since its April rally and closing with 1612.00 on Friday 15th January. However its stock performance is more to be seen in conjunction with the general ills plaguing the sector rather than some event affecting Easyjet per se: last week it closed with – 1.83% which is in line with the sectoral average of -1.75%. Certainly, the budget airliner, which last year turned twenty years old, suffered a fierce dip at the end of November from the fallout of the Paris terrorist attacks. As a result, the market depreciation means it is a cheaper stock to buy, with potential to return to its former glory provided geopolitical tensions and the changing price of oil don't mess things up. (Read more)

Other Insights on Related Shares: EZJ.L
Related Shares: Easyjet Share Price

At first sight, Lloyds wouldn't seem a natural choice for its investment potential going into the new year. It had a torrid 2015, dogged by the continuing reverberations the PPI misselling scandal, probes by the regulator into rate rigging, and, of course, global market sluggishness. Its stock value has suffered the consequences, leaving 28% on the ground since touching its maximum in May last year, when one share was worth 89p, and slid down to today's minimum of 67.80p. See chart. However, moving into the new year, Lloyds has many factors going for it and now there is a real buzz surrounding the stock. (Read more)

Other Insights on Related Shares: LLOY.L
Related Shares: Lloyds Share Price
Posted by ShrutiAggarwal on 9 January 2016, 7:38 AM

Vodafone, A hold with an upside of 10-15%

Vodafone PLC is pretty fairly priced at the current levels and we do not see an upside of more than 15% from the current price levels. According to the data from Morning, the stock has a forward P/E of 40.4 compared to FTSE100 12 months forward P/E of 13.34. This also indicates that the stock is slightly overpriced at the current levels. Currently the stock has been trading above its 50 day and 100 day moving average of 217.68 p and 217.9 p respectively. We expect the stock to be range bound between 220 p -245 p in the coming quarters and fiscal year. Vodafone Group Plc (Vodafone) is a mobile communications company which provides services to mobile voice, messaging, data and fixed line. It has a market cap of £58.80 bn.The Company also has products such as international money transfer, savings and loans, salary disbursements and access to insurance products in different markets.  Vodafone is an industry leader with 446 million customers, mobile operations in 26 countries and fixed broadband operations in 17 countries. Vodafone is bringing the benefits of the mobile and digital revolution to consumers and businesses across the world, from offering 4G services in 18 countries to providing services such as machine-to-machine (‘M2M’) technology and M-Pesa, the mobile payments service that provides financial freedom to millions of people.

  (Read more)

Other Insights on Related Shares: VOD.L
Related Shares: Vodafone Share Price

GlaxoSmithKline fairly priced at the current levels and we don’t see much upside in the stock from the current price levels. We expect the stock to be range bound between 1280p to 1400p in the coming quarters and fiscal year. The company has been trading in a range between 1227.50p to1645p over the past year. Based on earnings estimates for the company's fiscal year ending in December 2016, the stock has a price-to-earnings ratio of 16.6 which is slightly up compared to FTSE100 12 month forward P/E of 13.37. The stock has a trailing price to earnings of 6.81.The Stock finished trading on London stock exchange on 31st December 2015 at 1373 p a share.GlaxoSmithKline plc. (GSK) is a healthcare company that researches and develops pharmaceuticals, vaccines and consumer healthcare products and has a market cap of £66.8Bn. The Company operates in two segments namely, Pharmaceuticals and Vaccines, and Consumer Healthcare. The Pharmaceuticals segment develops and makes medicines to treat a range of acute and chronic diseases. The Consumer Healthcare business develops and markets products in four categories namely,wellness, oral health, nutrition and skin health. Its brands include Sensodyne, Panadol, Horlicks, Polident, Paradontax, Tum,ENO, NiQuitin/Nicorette, Abreva, Zovirax and Aquafresh.

Out of the two business segments, the company generates over 74% of the revenue from pharmaceuticals and vaccines. However, in the cumulative third quarter 2015 results, the pharmaceuticals turnover was down by 7% mainly because of the disposal of the oncology business to Novartis. The other business segments continued reporting strong growth reflecting the promising growth of the business. The company reported operating profit of £10,576 m in the nine months 2015 compared to £2906m a year ago. The cumulative Q3’15 results included non-core items which resulted in a net credit of £6204m , which in turn raised the operating profits to £10,576m in cumulative Q3’15. In the absence of non-recurring or non-core items, the adjusted operating profit in the cumulative Q3’15 was £4372 m compared to adjusted operating profit of £4824m, a year ago. The net credit of £6,204 m reflects the impact of Novartis transaction. This included the profit on disposal of the Oncology business to Novartis of £9,233 million, acquisition charges of £1,170 m and other restructuring costs of £1,860 m. However the company’s cash flow from operations declined to £1,068 m in the cumulative Q3’15 compared to £2,966 m a year ago. The cash flows declined mainly because of lower operating profit margins, negative currencies impact and increase in receivables from the accelerated seasonal sales of vaccines. Therefore, the company’s performance was slightly weak in the first nine months of 2015 compared to a year ago and the management expects the same in fiscal 2015 as well. However the major challenge faced by the company is the pricing pressures on Advair in the US and Europe. The company has been the leader in respiratory diseases over 40 years and Advair is one of its mature products. To strengthen the respiratory portfolio, the company has added a few new medicines such as Relvar, Anoro Ellipta and LABA dual bronchodilator, Incruse Ellipta (LAMA) and Arnuity Ellipta (ICS). (Read more)

Other Insights on Related Shares: GSK.L