Mindful Money’s weekly share-tips: Kingfisher, Severn Trent and Tate & Lyle

26th May 2014

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Kingfisher investors will be hoping to hear that the UK’s buoyant property market has helped drive-up sales for the B&Q owner when it delivers its first quarter trading update on Thursday.

Ahead of its results, broker opinion presently points towards a ‘cautious buy’. Keith Bowman, equity analyst at Hargreaves Lansdown Stockbrokers says: “Better spring weather year-over-year and an improving UK housing market are likely to underlie the positive performance.

“The group’s Screwfix brand and its exposure to the smaller tradesmen market may again lead the growth in sales.”

While the firm’s stock is up 26% over the past 12 months, lacklustre trading conditions across Europe are likely to have held back progress across the group’s continental operations.

Sheridan Admans, investment research manager at The Share Centre, who is calling the shares a ‘hold’, says: “Rather than exiting the market, the group is searching for a Chinese partner to support its operations, so investors will be keen to see what progress is being made in this respect. Alongside this, how the expansion of Screwfix into Germany and Portugal is fairing will also be of interest.”

Investors are not anticipating any surprises from Severn Trent, down 6% over 12 months, when it publishes its fourth quarter results on Thursday. Goldman Sachs reiterated its ‘buy’ recommendation on Friday while in line with the market consensus Admans is calling the water utility group a ‘hold’.

He says: “Comments such as trading in line with expectations are the norm. Investors will expect further comment on regulatory issues, as this is the year that Ofwat delivers its final review for the next five-year regulatory period.”

FTSE 250 listed sugar and sweetener business Tate & Lyle is also updating the market on Thursday, when it is scheduled to report its full year results.

In the wake of an effective profits warning as of its third quarter February trading update, the expectation is that pre-tax profit for the year will come in broadly flat.

The consensus analyst forecast stands at £322.5m, down 2% year-over-year says Bowman. He adds: “An overhang of unsold Chinese sucralose had weighed on prices for Tate’s own SPLENDA® Sucralose product. More positively, although looking longer term, sales growth in the emerging markets provides possible opportunity. Furthermore, and with group debt having been reduced in recent years, room for acquisitions now potentially exists.”

However a 22% share price fall over the past 12 months appears to be viewed as a potential opportunity, as ahead of the results, analyst opinion currently points towards a ‘buy’.

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