Sunday share tips: JD Sports, CYBG, DekelOil
(ShareCast News) - JD Sports Fashion shares should be avoided, recommends the Sunday Times' Inside the City column, noting that they can be bought for close to 17 times forward earnings. The trainers and 'athleisure' clothing retailer, led by executive chairman Peter Cowgill, has seen its valuation soar fivefold to almost £4bn.
Annual results on Tuesday are forecast to include a rise in profit before tax of not far off 50%, analysts at Peel Hunt have forecast. With such a heady p/e ratio, investors expect the march of the sports footwear empire to continue, with further rapid raids into Europe and more smaller rivals acquired, possibly with further forays into Asia-Pacific beyond the existing outlets in Malaysia and Australia. Cowgill's all-conquering hubris is already setting red lights flashing for some.
Shares in CYBG, the holding company of the Clydesdale and Yorkshire Banking Group, were a 'sell' for Questor in the Sunday Telegraph. Since the financial crisis, the move to making banks safer, enforcing greater capital adequacy, has come at a cost to profit margins, especially for smaller players.
While shares in the challenger bank are up since they floated last year, January's result showed net interest margin down four basis points as its core small-business lending book shrank slightly. Like it larger peers, CYBG will close a swathe of its branches this year and is also in line for some PPI mis-selling claims. Broker Panmure Gordon forecasts lower margin mortgage growth will outpace SME lending to keep NIM squeezed. A p/e ratio of around 12 forecast earnings is a bit demanding compared to its challenger peers.
Midas in the Mail on Sunday said DekelOil Public was a hold for existing investors, or a speculative buy for adventurous newcomers. Unlike most palm oil producers, Ivory Coast-based Dekel generates less than 10% of its output from its own estate, with most coming from local smallholders. Dekel sells small trees from its own nursery to local famers who sell fruit back to the company which creates crude palm oil via a modern mill. The ethics of the Ayenouan palm oil project has attracted investment from the World Bank, which subsidises smallholders to buy the seedlings.
Up from 39,000 tons produced last year, Dekel should deliver 45,000 tons in 2017, rising again in 2018. Dekel is expected to release first quarter production and revenue figures this week. In 2017, profits are expected to jump to €6.5m, reflecting increased production and higher prices, with further growth forecast for 2018, with dividend payments rising. Demand in Dekel's core market of West Africa growing as living standards rise, and management are planning for a second plantation near Abidjan, and a third in Ghana.
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