Tuesday preview: Punch, N. Brown, Inflation

11th Oct 2010 15:42

Tuesday's full year results for Punch Taverns will be the first set of figures released under the helmsmanship of new boss Ian Dyson.The heavily indebted pubs group raised full year profits guidance back in August after trading improved in the final quarter of the company's fiscal year. Like for like sales in the 12 weeks to mid-August were up 2.6% year on year.Market consensus is for profit before tax of £131m on sales of £1,274m. Recent trading updates from sector peers Mitchells & Butlers and Marston's have been encouraging and there is every chance that Punch will report improved trading has continued into its new financial year.The company recently hosted a "meet the new chief executive officer" day for investment analysts and clearly left a favourable impression on KBC Peel Hunt. "There is a positive spirit in this company that is tangible, and this was also in evidence at the analysts' trip around the managed estate three weeks ago, which focused on the value of the reinvestment process," the broker said. "What has been achieved is remarkable. Punch's securitised tenancies could be allowed to default, and there is still value in the managed pubs less relevant debt, plus cash that has accumulated at the parent company. We will be looking at our valuations as this approach suggests value could be significantly higher than the existing 85p share price," it added. "Whether Dyson actually presses the button on this is the biggest question in his in-tray. The other major question he faces whether he asks the bondholders for compensation for protecting the securitised tenancies from default. We expect these issues to feature strongly in the 12 October finals, which should prompt renewed momentum in the share price," Peel Hunt opined.Internet and catalogue home shopping company N. Brown should continue on its growth path with its interim results, though the pace of growth is likely to have slowed.Panmure Gordon thinks underlying earnings before interest and tax will be 1.1% higher than last year at £46.0m, while profit before tax should advance by 2.4% to £42.8m. On those figures Panmure Gordon calculates earnings per share of 11.6p, up 5.1%. "We expect an interim dividend of 5.6p (+27.6%)," the broker predicted.Sales are forecast to hit £349.5m, up 3.2% on a year earlier. "Clothing macro data have been strong in the period to date. N. Brown customers' income streams are likely to be less affected, relatively, than other retailers' by rising interest rates (less exposed to mortgages) and unemployment," is Panmure Gordon's view.The gross margin may be subject to some erosion, however, with the broker suggesting it could deteriorate by one-fifth of a percentage point to 52.9%, as trailed in the firm's July statement."The outlook for bad debts will be key: in July, management were able to report continuing stabilisation in metrics such as bad debt as a percentage of turnover and percentage of accounts in arrears. Moving from stabilisation to improvement would immediately benefit the P&L [profit & loss]. However, our assumption for H2 2011E [estimate of second half earnings for fiscal 2011] is similar to H1 2011E, and this is where we think N. Brown could provide a positive surprise for the market," Panmure Gordon said.The same broker has been turning its eye on engineering software developer Aveva which is scheduled to give a trading update and, in a nutshell, Panmure Gordon thinks the shares are too expensive and liable to be re-priced after results come out."While the update is likely to be short and sweet and suggest that trading is in line with expectations, the absence of an upgrade could weaken the share price. Data issued by engineering conglomerate IMI on the nuclear market helps us to understand why Aveva is so highly rated. IMI informs us that of the world's 436 nuclear plants c50% are in the last ten years of useful life and this is fuelling very large maintenance spend and a huge investment in new plants (by 2030 there will be another 400 plants built). Aveva shares, currently 1412p, are like to end closer to our target price, 1270p, on the day," the broker predicts."While the hot money moves out, long term investors will Hold," Panmure Gordon adds.Singer Capital Markets is singing a similar tune. "We believe estimate momentum will play a crucial role in sustaining the re-rating the company has seen recently. Given planned investments in Aveva Net and the modest pace of recovery in its markets, we believe it is difficult for the company to beat what appear to be some aggressive market expectations near-term," states Singer analyst Tintin Stormont.On the crack of midnight the embargo on publishing the British Retail Consortium's retail sales monitor will be lifted. The expectation is that retail sales showed a modest uplift in September from August's level.Round about the same time the housing market survey by the Royal Institute of Chartered Surveyors will be released, and is likely to show that more surveyors saw price falls over the last three months than those who saw price rises. The balance of the latter minus the former is expected to move further into negative territory, at 35% of the total, from -32% in August.Sticking with the housing theme, the Department for Communities and Local Government (DCLG) is expected to show that house prices, at least compared with the same month a year ago, were higher in August. Market consensus is for the August reading to advance to 9.4% from 8.4% in July. The September UK consumer price index for September is expected to be unchanged from August's level. The annual inflation rate is also expected to be unchanged from August, at 3.1%.Higher food prices are likely to have prevented the inflation rate from heading back down towards the 2% target level set by the Bank of England. The retail price index for September is expected to show an easing of the year on year gain to 4.4% from 4.7% in August. UK trade figures are expected to make their usual grisly reading. The total trade deficit is seen narrowing to £4.1bn in August from £4.9bn in July, while the visible trade deficit may just dip below £8.0bn after rising to £8.7bn in July.INTERIMSBrown (N.) Group, C&C Group, Summit CorporationINTERIM DIVIDEND PAYMENT DATECapita Group, ChesnaraQUARTERLY PAYMENT DATEXP PowerINTERNATIONAL ECONOMIC ANNOUNCEMENTSConsumer Confidence (JPN)Consumer Price Index (GER) (07:00)Current Account (FRA) (07:45)FOMC Interest Rate Minutes (US) (19:00)ABC Consumer Confidence (US) (22:00)GMSACTA, Aurum Mining, Leisure & GamingFINALSAir Partner, Asian Citrus, Imperial Innovations, Punch TavernsAGMSInvesco Perpetual AiM VCT, M&G Equity Inv Trust Capital Shares, M&G Equity Inv Trust Income Shares, Orosur Mining Inc., Standard Life UK Smaller Companies TrustTRADING UPDATESAvevaUK ECONOMIC ANNOUNCEMENTSBRC Sales Monitor (00:01)RICS House Price Balance (00:01)Balance of Trade (09:30)DCLG House Prices (09:30)Consumer Price Index (09:30)Retail Price Index (09:30)FINAL DIVIDEND PAYMENT DATEColefax Group, IG Group Holdings