Mindful Money’s Monday share tips: SABMiller, Tesco, Burberry, Reckitt Benckiser

13th April 2014


Investors will be hoping for some positive news on SABMiller’s foothold in emerging markets when the brewer publishes its latest trading statement on Tuesday writes Philip Scott.

The South African business, and Peroni owner, has witnessed its shares drop by 10% in the past 12 months but it remains in ‘buy’ territory according to the analyst consensus on Digital Look.

Investors will be looking for signs of growth from its developing economy operations and an improvement to the lacklustre growth, it experienced in Europe and the US in the previous quarter asserts Sheridan Admans, investment research manager at The Share Centre, who right now rates the stock a ‘hold’.

He says: “It is likely the group’s key countries continue to suffer from weaker currencies against the dollar, impacting earnings. Investors will also be keen to see if its strategy to selectively reduce prices in its European operation is continuing to support volume growth.

Wednesday sees supermarket giant Tesco publish its full year results. Hit with a 27% share price drop over the past year, shareholders will be eager for an update on how the business is coping with the rise in popularity of the so-called heavy discounters such as Lidl and Aldi, especially given the recent disappointing updates from Sainsbury and Morrison.

Fourth quarter UK like-for-like sales excluding fuel are expected to drop back by some 2% and pre-tax profit for the full year is currently forecast to fall by around 14% to just over £3bn.

Keith Bowman, equity analyst at Hargreaves Lansdown Stockbrokers says, while it is not generally expected, any possible upping of its previously announced £200m price investment initiative and in response to Morrison’s newly detailed £500m investment will be closely watched for.

While Deutsche has reiterated a ‘buy’ recommendation on the shares, Bowman points out that prior to the results, consensus analyst opinion currently points towards a ‘sell’.

He adds: “Against a backdrop of ongoing management changes, an aggressive change of strategy continues to be considered by analysts, with Tesco potentially able to inflict damage on rivals, sacrificing profit in order to regain recently lost market share.”

Admans, who rates it a ‘hold’, says: “Tesco is likely to see results impacted by late Easter sales this year and the continuing impact the discounters are having over the big four supermarkets.

“Investors will be keen to hear any positive updates on its expansion in China, its recent online geographic launches, more information on its move into the pension market and the increase in Tesco Express openings.”

On the same day, luxury retailer Burberry unveils its latest trading update. Its shares, currently rated a ‘buy’ according to the latest consensus, have risen by 7% in the past year.

But hit by the slowdown in China, designer brands have been going to a tougher time of late and over the past three months the group, famous for its check patterns, has seen its stock slide by 4%.

Investors will be hoping to hear how the incoming chief executive Christopher Bailey plans to take the company forward notes Admans, who is calling the business a ‘buy’.

He adds: “Key areas investors will be looking for him to address will be the termination of the Japanese licence, the progress of the beauty business, management changes and the impact of an appreciating sterling.”

Household goods group Reckitt Benckiser, up 2% in 12 months, reports its first quarter trading update on Wednesday.

Consensus analyst opinion ahead of the report has the business, which owns a plethora of brands including Nurofen and Strepsils, rated a ‘strong hold’. However brokers at Citigroup have recently reaffirmed a ‘buy’ position, while Credits Suisse has reiterated an ‘outperform’ rating.

Bowman says the group’s emerging markets businesses will be a main focus with weak fourth quarter trading for the likes of Russia, Brazil and Thailand previously hit, dragging on growth generated in North America and Europe.

He adds: “Any update on a possible spinout of its Pharmaceuticals business will also be watched for – the unit lost exclusivity on tablets for its core Suboxone heroin substitute product in 2009 – whilst management’s focus and progress on growing the company’s health and hygiene products will prove a further focus – 10% growth in like-for-like health product sales led 2013 full year results.”

Investors will expect to hear whether management still expect to maintain the 4.5% growth in revenue target says Admans, who rates the shares a ‘hold’. He adds: “An update on the Schiff acquisition will be welcome, along with commentary of future acquisitions. There have been rumours that Reckitt Benckiser is looking to acquire Merck’s over the counter health business.”

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