The Week Ahead: City looks to improved trends in property sector
Tuesday 04 May 2010
With house prices rising and the economy seemingly on the mend, the City is looking to news of improving trends from the property website Rightmove, which is due to post an interim management statement tomorrow.
Panmure Gordon expects the much improved outlook for Britain's property sector to feed through to a rise in the number of estate agency clients, while Numis is pegging its hopes on evidence of a "good uptake in both the premium 'Rightmove choice' products and the new display advertising products". Looking further out, Panmure said the recent string of positive updates from housebuilders pointed to gains as new homes are built.
"The consistent message is of an improved [profit outlook for the second half of 2010] and an enlarged land bank," the broker said. Those worried about competitive threats may also breathe easier, with Panmure pointing out that Rightmove's site traffic "remains very strong and there is no evidence of any diminution of market share".
Results/Updates: Aberdeen Asset Management, G4S and Standard Chartered.
The information technology group Logica is expected to follow in the footsteps of its peers when it posts a first-quarter update. Panmure Gordon anticipates news of in-line trading and recovering margins, taking its cue from rivals Atos Origin and Tieto.
On the downside, the broker said negatives for Logica included the dragging effect of the Benelux region and the pre-election lull in the British public sector.
Panmure forecasts that Logica's group revenues will come in at £926.6m, down from £954m last year. "Logica's valuation is cheap and the UK election stands in the way of the (in our view) inevitable re-rating," Panmure said. It noted that the company should do well because the public sector "looks to outsourcing to reduce cost and 'do more for less' under the new government (of any hue)".
Also tomorrow, the City expects to hear of $169.8m in revenues when the computer chip-maker CSR issues its first-quarter results. Consensus forecasts also anticipate 5 cents in underlying diluted earnings per share.
Results/Updates: Lancashire, Logica, Next, Provident Financial, Rathbone Brothers, Sage, Rightmove, Antofagasta, CSR, Legal and General, Millennium and Copthorne Hotels and Prudential.
The defence group Cobham will issue an interim management statement as voters pick the next government. Whatever the result, Execution Noble foresees cuts in defence spending, although it advises piling into Cobham rather than BAE Systems, which has a larger exposure to the UK. "The overall exposure to the UK is much lower for Cobham, at 10 per cent revenues and encompassing Cobham's lowest risk activities, compared to BAE, with 20 per cent exposure and encompassing BAE's higher risk activities," the broker said last week.
Also on Thursday, the FTSE 100-listed asset manager Schroders is due to post a first-quarter update. Numis expects the release to show evidence of progress towards its £172.1bn full-year assets under management forecast for the group. If achieved, this would represent growth in net flows of about 10 per cent.
Results/Updates: Morgan Sindall, Cobham, Costain, Wm Morrison, Randgold Resources, RSA Insurance, Schroders, Talvivaara Mining, Tomkins, Arriva, Diageo, Rexam and Vedanta Resources.
The Lloyd's of London insurer Catlin is due to post a first-quarter update. Despite Catlin's exposure to the Chilean earthquake, Numis expects the company to report a positive start to 2010, with "premium rates holding up better than originally anticipated and continued premium income growth from its international offices and US business". The broker said: "Catlin's initial Chile loss estimate of $140m could be susceptible to upward revision given that it was based on an industry loss at the lower end of the consensus range, although any change is unlikely to be reported before the first half results."
It added that elsewhere, Catlin might be exposed to losses connected to the oil rig disaster in the Gulf of Mexico. Also on Friday, ITV's interim management statement is expected to point to ongoing strength in advertising, with Numis citing "anecdotal evidence suggesting that the national market and ITV could be up 12 per cent in 2010".
"We have consistently indicated that our current forecast of a 2 per cent rise is conservative," Numis said.
Deutsche Bank was also upbeat, noting that even if the advertising market slows down in the aftermath of the election, momentum is such that the risk to earnings "remains on the upside". "All political parties are in favour of the removal of the remaining regulatory constraints on ITV," the broker added.
Results/Updates: Catlin, ITV, HSBC and Royal Bank of Scotland.
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