Mindful Money’s Monday share tips: BSkyB, Diageo & Royal Dutch Shell

27th January 2014


Investors will want to hear how BSkyB is holding up against competitor BT Group, when it delivers its half-year results on Thursday writes Philip Scott.

BSkyB, whose shares have loosened by 10% over the past three months, is expected to have competed hard against its rival, which now also offers its own package of Premier League football games.

Brokers are however still coming out in its support with Westhouse Securities and Deutsche having just re-iterated ‘buy’ recommendations.

Further growth in customer subscriber numbers is likely, although with marketing and content costs having risen, a similar dip in profitability as reported at the first quarter stage, is currently forecast says Keith Bowman, equity analyst, Hargreaves Lansdown Stockbrokers.

He adds: “With competition now more intense and concern for BT’s dominance in the UK broadband market currently underpinning rumours of a potential Sky tie-up with Vodafone, analyst opinion currently points towards a ‘hold’, albeit a firm one.”

For his part, Sheridan Admans, investment research manager at The Share Centre rates the shares a ‘buy’. He says: “Investors have been receiving mixed messages from analysts recently and there has been growing interest from the media, highlighting possible future scenarios, so they will keen to receive management comments in this statement.”

International spirits maker and brewer Diageo, updates the market on Thursday with its own set of half-year results.

The shares in the group, which owns Smirnoff and Johnnie Walker have edged up 5% over the past year but are down by 4% over six months. Brokers at UBS have reiterated a ‘neutral’ stance, JP Morgan Cazenove have downgraded to ‘neutral’ and Numis Securities have given the stock an ‘add’ recommendation. Admans is more bullish, listing the shares as a ‘buy’.

Looking back on the group’s recent performance, first quarter sales growth materialised at the lower end of analyst expectations, impacted by weakness in emerging markets, particularly Ghana and Nigeria observes Bowman.

He says: “In China, a clampdown on gifts to officials appeared to hit. An expected currency related drag on full year profits was also highlighted. Similar themes at the half-year stage could again be reported. Nonetheless, given expected long-term emerging market growth and the group’s sizeable exposure to the recovering US economy, analyst opinion remains positive in tone, currently denoting a cautious ‘buy’.”

Royal Dutch Shell’s fourth quarter figures arrive following a wave of controversial publicity with the group having issued a shock profit warning this month, due to the unexpectedly larger exploration costs and weaker demand for downstream products.

Investors will hope that there are not too many more negative surprises from the oil refining giant, whose shares have dropped by 3% over the past year.

Admans says: “How management proposes to deal with some of the issues facing the industry, such as the weak conditions in the refining industry and the potential fall in energy prices that some analysts are predicting, will be of interest for investors. We currently list Royal Dutch Shell as a ‘buy’.

Friday sees Vedanta Resources update the market with a production report. Analysts will be hoping for some optimism, most notably from the firm’s Cairn India acquisition coupled with increased production rates and an upbeat outlook on the exploration prospects.

Shares in the group, which mines for the likes of copper, zinc and lead have plummeted by 27% over the past year and by 21% over just three months. Admans however rates the shares  ‘buy’ He says: “Vedanta’s other businesses have not fared as well, but mining restrictions that have been lifted in certain Indian states should have helped production levels resume for commodities such as iron ore.”

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