Shore Capital has reiterated its ‘buy’ recommendation on Premier Foods and upped its full-year profits estimates for the firm following a string of positive announcements from the owner of Mr Kipling.
Premier unveiled strong final numbers last week, boosted by home cooking during the pandemic, and announced it would resume dividend payments after a 13-year hiatus.
That was then followed by confirmation that it had priced its £330m fixed rate note refinancing programme at an annual interest rate of 3.5% with a semi-annual coupon payment.
Said Shore Capital: “Such a rate is well below a range of around 4.5% to 5.0% that we felt could be achieved, and reflects very well indeed upon the major change the group has engineered with respect to the improvement in the quality of its solvency ratios, including the simplification of its pensions position, change that brings with it further optionality to deliver shareholder benefits on an ongoing basis.”
The new notes will replace the current 6.25% FRN, which will be redeemed next month. “Accordingly, this development will result in a further £8m reduction in its financing costs and so increases its full-year 2021/22 expectations for adjusted profit before tax,” Shore Capital noted.
As a result, the broker has upgraded its pre-tax profits estimates by 7.2% to £119.6m for 2022 and by 8.1% in 2023, to £126.9m.
Royal Bank of Canada cut its price target for Antofagasta shares because of tax risks for the copper miner in Chile.
Lawmakers in the lower house of the world’s biggest copper producer nation approved a bill on 6 May that would impose a royalty on copper sales to pay for social programmes. The tax would increase with prices, causing opponents to complain it would hit investment.
RBC analysts said if the change goes through it could cause a decline of 50% or more in Antofagasta’s net asset value. The bank kept its ‘underperform’ rating on the company’s shares and cut its target price to £10.50 from £14.
“We don’t think the current royalty bill will pass, but we do think following recent political shifts that risks remain high and are unlikely to be resolved until after November elections,” RBC analyst Tyler Broda said in a note to clients.
JP Morgan cut its earnings estimates and price target for SSP but kept its ‘overweight’ rating on the owner of the Upper Crust baguette chain and other transport-led food outlets.
Consensus estimates for SSP do not yet reflect the slower-than-expected revival of air travel, JP Morgan said. Airlines and consultants forecast air travel returning to 80-90% of pre-Covid levels by 2024/25, the bank said.
JP Morgan predicted SSP’s revenue would fall 70% in 2021 from 2019, a steeper drop than the 45% the bank had predicted before. The bank also cut its revenue assumptions by 11% for 2022 and 6% for 2023. Earnings will drop to a £268m loss in 2021, much worse than the £96m loss the bank had predicted previously.
Results will improve after 2021 but more slowly than expected with SSP posting £170m of earnings before interest and tax in 2023 compared with a £185m profit JP Morgan had forecast for that year.
The bank kept its ‘overweight’ rating on SSP shares but cut its price target to 350p from 400p based on the pace of recovery and SSP’s £475m rights issue, which it completed in April to bolster its finances against a slower recovery for transport markets.
