Mindful Money shares update – Petrofac, Admiral, G4S and WPP

26th August 2013

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Following the bank holiday weekend, the market awaits updates from oil services group Petrofac, insurer Admiral and advertising giant WPP. Philip Scott round ups what the brokers are saying.

On Tuesday, Petrofac delivers its second quarter results. The oil equipment, services and distribution sector has experienced relative weakness so far this year as contract awards have not been as great as expected. Over the past 12 months, Petrofac’s shares are down 15 per cent and by 6 per cent over the past six months. Investors will be interested in hearing about new orders received and the size of the order backlog. The broker consensus on share data website Digital Look has the stock listed as a ‘buy’ as does Sheridan Admans, investment research manager at stockbroker, The Share Centre, who notes: “Updates on the restart of operation in Algeria will also be of interest.”

Security group G4S reports its half year results on Wednesday. In the wake of both the Olympics fiasco and announced investigation by the UK government into alleged overcharging, speculation that the group may seek to raise additional cash persists.

Its shares have dropped by 14 per cent in the past year but have jumped by 9 per cent in the past month on the back of some favourable broker reports. Following a series of bolt-on acquisitions over recent years, a new chief executive potentially offers the opportunity to start afresh and strengthen the balance sheet. Alternatively, business disposals and cost cutting measures could also be used to place the company on a firmer footing. Digital Look has the broker consensus pointing towards a ‘buy’.

As for the actual results, Keith Bowman, equity analyst at Hargreaves Lansdown Stockbrokers says that both revenues and earnings are expected to retreat, impacted by a combination of European austerity, pricing pressures for its UK and Irish cash solutions business, along with start-up costs associated with new contracts. He adds: “Prior to the results, analyst opinion currently points towards a ‘hold’, albeit a strong one.”

Thursday sees Admiral Group’s second quarter results arrive. The broker sentiment towards the stock is ‘neutral’ on Digital Look while Admans lists the stock, which has risen by 9 per cent over the past year as a ‘sell’. He says: “Investors will be looking to see if there has been any significant increase in claims and any improvement to its loss ratio. How its international operations are progressing will also be of interest.”

Advertising group WPP reports its half year results on Thursday. The past 12 months have seen its shares rise by 43 per cent and by 18 per cent in the last six months. Digital Look has the stock as a ‘buy’. Bowman believes that having highlighted increased momentum in like-for-like revenues at its four month AGM trading statement, the update is likely to see on-going progress reported. He says: “Growth across all of its geographies is likely to have continued, with strength in Asia Pacific, Latin America, Africa and the Middle East and Central and Eastern Europe helping to offset weaker growth in the more mature markets of the US and Western Continental Europe.

“The recently announced merger of rivals Omnicom and Publicis is likely to prove a talking point for both management and analysts alike. Conflicted clients provide an opportunity for WPP, although this is potentially offset by increased competitive strength from its new bigger rival. Prior to the results, and ahead of next year which brings major advertising events such as the football World Cup and the Winter Olympics, analyst opinion currently points towards a ‘strong buy’.

FTSE Small-Cap listed stock Chesnara has brokers labelling it a ‘strong buy’ according to Digital Look. The life insurance firm, has enjoyed a 49 per cent share price rise in the past 12 months. With its second quarter results arriving on Thursday, Admans, who labels it a ‘buy’ says: “Investors will be looking for evidence that the dividend is still sustainable given its current yield of circa 6.7 per cent, provided by healthy cash generation. Any update on acquisitions will also be of interest. Investors will want to see evidence that this niche operator is maintaining its solvency ratios above target.”

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