Mindful Money’s Monday share tips: Lloyds, RBS, Home Retail Group, GSK, Next and BSkyB

28th April 2014

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This week witnesses a spate of firms come to the market with their latest updates including reports from the still state supported Lloyds Banking Group and Royal Bank of Scotland writes Philip Scott.

But first, Wednesday sees the FTSE 250 listed Argos owner Home Retail Group reports its full year results.

After enjoying a 30% share price hike over the past 12 months, the group’s push online is again likely to be underlined, with mobile commerce sales proving a particular feature in recent quarters notes Keith Bowman, equity analyst at Hargreaves Lansdown Stockbrokers.

He says: “An update with regards to digital concept Argos stores may also be included while news on the planned reduction in the group’s Argos store portfolio could also be forthcoming. Management previously guided towards full year pre-tax profit of between £107m to £111m, a gain of nearly 23% at the upper end year-over-year.”

Prior to the announcement and with concerns growing over its reliance on the highly competitive electrical sales universe, consensus analyst opinion currently denotes a ‘hold’.

GlaxoSmithKline, unveiling its first quarter results on the same day hit the headlines last week, as a result of the M&A activity engulfing the pharmaceuticals sector where it was revealed that the FTSE 100 research giant and Novartis have moved to launch a joint consumer products initiative, something shareholders will be keen to hear more on.

Shares in GSK, down by 2% over the past year are currently viewed as a ‘hold’ by the market but Sheridan Admans, investment research manager at The Share Centre lists them as a ‘buy’.

READ MORE: FTSE 100 Friday close: Busy week in the pharmaceutical sector helps blue-chips edge higher

He says: “Revenues will still be expected to decline as a result of patent losses, but we expect to hear more encouraging news from its R&D and progress on regulatory approvals. Markets will also look out for reaction to the bribery allegations occurring in Eastern Europe and whether the company plan on resuming business quickly in China.”

Wednesday also sees fashion retailer Next delivers its latest interim management statement. With the firm’s stock up 45% in the past 12 months investors will want to hear it can continue its strong performance. Rated a ‘hold’ by market consensus, Admans says: “The company continues to focus on its online business and expand its retail space, while remaining focused on cost saving. An update on how its overseas expansion is progressing will also be watched with interest.”

The latter part of the week sees the banks take centre stage with Lloyds the first to update with its interim management statement on Thursday. Although the business has witnessed its shares soar by 40% in the past year, it has slipped by 8% in last three months but nonetheless analysts are broadly positive with Nomura recently having upgraded its recommendation to a ‘buy’ reflecting the market consensus view, although Citigroup rates them a ‘hold’ as does Admans.

He says: “Although the sector has once again been under pressure, investors will be expecting to hear that the group remains on track with its restructuring plan. Bad debts have been falling and as a result there will be hopes that earnings momentum can be maintained. Comments on the UK economy and housing markets will be other areas to concentrate on, alongside cost cutting and regulatory issues.”

Thursday also sees satellite broadcaster BSkyB, up 5% over 12 months, update with its third quarter numbers. While the broker consensus is neutral, analysts at Berenberg Bank last week reaffirmed the firm’s ‘sell’ rating but Deutsche repeated its own ‘buy’ recommendation. Admans, who calls BSkyB a ‘buy’, says: “Investors have been getting nervous about potential competition and will be keen to see comment on new initiatives in addition to the group’s outlook for the UK consumer.”

On Friday, the still majority state-owned Royal Bank of Scotland reports its first quarter trading update. Unlike Lloyds’ strong performance, RBS shares have only managed to edge ahead by 1% over the past year and are off by 11% over three months. Although last week analysts at Deutsche upgraded their recommendation to a ‘hold’, ahead of the update, and with management still dealing with legacy issues, the consensus analyst opinion currently points towards a ‘sell’.

Bowman says: “The group’s transition back to a UK focused bank is likely to remain the central theme. The company’s resizing from the current seven operating businesses down to three should support ongoing cost reduction. In the wake of further provisions for the mis-selling of products announced at its full year 2013 results, additional provisions appear unlikely, although not out of the question, with the relatively new chief executive still potentially eager to remove possible future bad news.”

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