Broker tips: Coca Cola Hellenic, BP, Regus

29th Oct 2013 11:46

Analysts at Nomura have downgraded their recommendation for shares of Coca Cola Hellenic as they believe that the positive technical impact of the company's inclusion in the FTSE indices has likely run its course.They now think the stock is more likely to trade in-line with fundamentals. In that regard, they highlight how Street expectations for a recovery in earnings "look high" and they now see risk of a de-rating. Thus, their current price target of 1,500p now offers 17% downside to the share price. More specifically, they see a slower growth outlook for global beer over the medium-term and a slower volume growth trajectory for the company versus the good years (2004-2008). Nomura is also below market consensus when it comes to operating (EBIT) margins. Lastly, they add that on their estimated forward price-to-earnings multiple of 23.9 the firm's shares look expensive, given negative earnings and de-rating risk; hence their decision to cut their rating to reduce from neutral. Longer-term Coca Cola Hellenic holds a number of attractions, including strong market shares in key territories, a balanced portfolio mix (circa 70% sparkling, circa 30% still) and an opportunity for per capita consumption to rise as the macroeconomic environment improves.Regus seems to have a lot going for it, with its expansion plans running ahead of targets, the profitability at its new centres coming in ahead of its own hurdles and with management maintaining a tight control on overheads, such that its financial headroom was extended in the quarter. Nevertheless, Investec said, the greater than previously projected additions to its new centres, of between 420 and 400 instead of 350, will clearly have an impact on forecasts. Moreover, Investec has moved its estimated 2013 profit before tax (PBT) forecast to £83m from £99m, for a 16% decrease. Similarly, its projection for fiscal year 2014 stands at £133.5m, instead of £145m as up till now. Fiscal year 2015 PBT forecasts, on the other hand, have moved up to £188m from £183m.So as to reflect the additional capital investment, the net debt position moves to £80m (prev: £18m), although that is still very comfortable in terms of available headroom, the broker added.Thus, while Investec believes that "near term returns will be diluted by the increase in New Centre openings", the ability to go beyond peak earnings now looks more realistic, it went on to explain.However, the company's shares have had a strong run, hence the broker's decision to downgrade the stock to add from buy, albeit while maintaining its PE-based price target unchanged at 205p. Investec has reiterated a 'hold' rating on BP's shares after the oil company reported its third quarter results.BP has raised its dividend 5.6% to 9.5 cents a share as earnings in the third quarter fell less than expected. Profit adjusted for one-time items and inventory changes declined to $3.7bn from $5bn a year earlier, beating the $3.4bn forecast.The company said it will sell a further $10bn of assets by the end of 2015 and give most of the proceeds to shareholders, favouring buybacks. BP has already sold $38bn of assets to pay for the Gulf of Mexico oil spill of 2010."The stockmarket doesn't want the oil majors to spend money. Instead, investors want their cash back," according to Investec analyst Neill Morton."And BP has obliged this morning, with an increase in the dividend, a new $10bn disposal programme (with proceeds going to share buybacks) and indicated flat capex in 2014. The bull case for 2014 is that operational gearing could surprise on the upside. The downside is that this could yet be overshadowed by the Macondo legal fallout. Hold retained."AB