Broker tips: WANdisco, Sky, Auto Trader

Shares in WANdisco muscled ahead more than 11% as finnCap placed its 'hold' rating on the provider of non-stop big data under review, as well as the company's 200p-a-share target price.

The company has today announced a proposed $15m fundraising at 160p a share and a potential expansion of its existing debt facilities.

finnCap analyst Andrew Darley noted that WANdisco's update noted four significant big data contract wins in the first quarter.

There was also a further significant deal won and already in advanced procurement stages.

Darley further observed that cumulative go-lives had accelerated to 14, from six, and that staff numbers had fallen to 126, from 143.

This meant that WANdisco's adjusted loss before interest, tax, depreciation and amortisation and net debt were better than planned for first-quarter 2016.

Chief financial officer Paul Harrison was leaving the company, Darley noted.

"We place our forecasts, target price of 200p and recommendation (formerly 'Hold') under review pending remodelling and a catch up with management," he said.

Numis raised its target price on Auto Trader to 495p from 439p and reiterated a ‘buy’ rating on the stock after the company reported its first full year results as a listed company.

The online car sales firm posted a £155m pre-tax profit, up from £10.8m the previous year on Thursday. Revenues rose 10% to £281.6m, while operating profits grew 27% to £169.6m. Basic earnings per share from continuing operations of were up to 12.67p from 0.85p.

The company proposed final dividend of 1p per share, totalling 1.5p per share for the year and said a rolling programme of share buy-backs would start “imminently”, with the majority of surplus cash after dividends being returned to shareholders.

Numis had expected pre-tax profits of £154m and revenue of £279.2m.

“Auto Trader reported strong finals, that were ahead of our expectations on all metrics,” according to analysts Paul Richards and Gareth Davies.

“We continue to forecast robust medium-term growth, underpinned by encouraging industry fundamentals.”

Numis raised its fiscal year 2017 pre-tax profit and earnings per share forecasts from £175.0m and 14.0p to £182.5m and 14.8p, respectively.

Shore Capital on Friday reiterated its ‘buy’ rating and target price of 955p on Sky after the broadcaster secured the lion’s share of TV rights to German Bundesliga football matches for €3.5bn.

Sky is paying €876m per year in the four-year deal with the German Professional Football Association. The group is forking out 80% more than its existing €486m deal and has been forced to give up some of its rights to rival Eurosport.

“Market consensus was for a 40-80% uplift making a midpoint of €778m, so this settlement is at the top of this range,” ShoreCap analyst Roddy Davidson said.

“That said, we regard this as an acceptable cost in light of the company’s assertion that it can be accommodated within current consensus forecasts (we are mid-range at the adjusted pre-tax profit level for the current year, and fiscal years 2017 and 2018), and in view of both its track record of driving revenue growth from a broad range of sports rights (e.g. 12% compound annual growth rate across its current Bundesliga contact), and fears that increased competition could have resulted in a more costly settlement and / or a less comprehensive package.”

Davidson added that the Bundesliga deal is a key element of Sky Deutschland’s proposition to German consumers.

Coupled with the expansion of Sky’s content base and the introduction of new features and services - including connected and on-demand services, box sets and exclusive entertainment programming –Shorecap believes the deal should “drive customer and revenue growth in this potentially large, but currently relatively immature pay TV market”.