Mindful Money’s weekly shares watch: ASOS, Sports Direct, Whitbread & Bunzl

8th December 2014


Given that ASOS shares have endured a caustic fall over the past 12 months investors will be very keen to hear some upbeat news when it updates the market this week.

The online retailer, initially known as As Seen On Screen, has witnessed its stock plunge by 61% over the past year following a number of profit warnings.

Tuesday sees the group publish its first quarter results and ahead of the report, the market consensus is sensing a buying opportunity as according to online share hub Digital Look the stock is in ‘strong buy’ territory. Notably analysts at both Numis Securities and Nomura have just reiterated positive notes on the company.

Sheridan Admans, investment research manager at The Share Centre, who rates the shares a ‘hold’ said: “Investors will be hoping that ASOS’ first quarter report will not be impacted too severely from the mild autumn weather.

“Any data on how its Christmas campaign is shaping up, after the scurry for bargains on Cyber Monday this week, will also be welcomed. We suspect the update on its overseas operations will be mixed.”

Thursday sees Sports Direct International deliver its second quarter results. The retailer highlighted a rather patchy start to the period when it reported healthy sales during the first quarter so the market will be keen to see if this trend continued to the end of the period. Over the past year the stock in the firm, which was founded by billionaire Mike Ashley, is off 7%.

Admans, who in line with the consensus rates the shares a ‘buy’, said: “Any comments on current trading, as the company enters the most critical sales period of the year, will also attract attention.”

In addition, Admans noted that given the declining economic outlook for continental Europe the company’s current trading in the region will be of interest to investors, as will any change in the strategy to expand its operations there.

“The company has previously forecast underlying EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization ) of £360m for the first six months, so the market will be looking to see if it has achieved that,” he added.

Whitbread, up a robust 33% over the past 12 months, is scheduled to announce its third quarter trading update on Thursday. Despite a generally difficult backdrop, Whitbread is likely to report a decent performance, driven by its Premier Inn and Costa Coffee brands.

Keith Bowman equity analyst at Hargreaves Lansdown Stockbrokers said: “UK hotel industry data for September and October highlighted high single digit UK regional, revenue per available room, growth. For Costa, while intense competition and the warmer weather provide headwinds, brand preference remains strong with underlying profits up over 20% at the interim result stage.”

Overall, with the group appearing to remain on track to meet its growth targets, ahead of the update the analyst consensus opinion currently signifies a ‘buy’.”

But against the consensus Admans is calling the stock a ‘hold’. He said: “Any comments on current trading and expectations for the festive period will also attract attention. In October, the CEO suggested that the comparative performance figures would become more demanding in the fourth quarter due to last winter’s relatively benign weather.”

Thursday also sees distribution and outsourcing group Bunzl provide its full year trading update. The FTSE 100 listed group, up 34% over 12 months, has seen recent trading in line with management expectations, with growth supported by acquisitions. Bowman noted that the group’s strong financial position and funding headroom is expected to allow it to consolidate in the markets in which it operates and deliver further growth.

He said: “Ahead of the announcement and with the share price having outperformed the broader FTSE-100 index by over 25% in the last year alone, analyst opinion currently points to a ‘hold’, albeit a strong one.”

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