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Vodafone to benefit from sterling's weakness, Deutsche Bank says

DB ups earnings estimates for Vodafone to reflect sterling's weakness. Cyan's share price more than doubles but Cantor Fitzgerald sees it tripling from here.

Vodafone
Free cash flow should be boosted by sterling's weakness

Having taken a bit of a battering in 2015 from the strength of sterling, the tide is set to turn in Vodafone Group PLC's (LON:VOD) favour.

Deutsche Bank reiterated its 'buy' recommendation for the mobile phone networks operator, as it nudged up its earnings forecasts for the current year and the next to reflect the weakness of sterling.

The forecast for next year's underlying earnings (EBITDA) has been lifted by 4%, while the earnings per share (EPS) projection has been hiked by 10%.

“Improving growth, margins and capital intensity in FY16/17 should help Vodafone shares re-rate from current levels and though there are inevitably riskier parts of the portfolio (e.g. UK and India at present) the cash flow boost as capex [capital expenditure] reverts to normal levels post project Spring, which will see Vodafone’s 5.3% dividend covered (sector 4.9%), should be further supportive,” the German bank said.

Telecom Plus PLC (LON:TEP), which trades under the Utility Warehouse brand, is no longer on the 'buy' list of German bank Berenberg.

In a commoditised market, Telecom Plus's selling point is its ability to offer better service and better value than existing suppliers, but Berenberg reckons the constraints on pricing provided by its long-term supply agreement with npower “the valuation proposition is lacking at present”.

“With wholesale commodity prices weakening further and the gap between the cheapest and most expensive suppliers persisting, we think growth at the firm will continue to be hampered in the coming years,” Berenberg said.

The bank has cut its earnings forecasts for 2017 and 2018 by around four or five percentage points to reflect lower customer growth assumptions, and the price target has been slashed from 1,400p to 1,000p.

The shares currently trade at 950p, down 3.7% on the day.

Price comparison web site Moneysupermarket.com Group PLC (LON:MONY) released results at the start of March and Credit Suisse has finally got around to revising its forecasts for the current financial year and the next.

The Swiss bank upped its revenue forecast for 2016 by 1.6 percentage points to 8%, primarily due to the web site's flying start to the year in the Home Services and Money silos, while its estimate of adjusted underlying earnings (EBITDA) has risen by 2% for the current year and 4% for the next.

The bank said the current valuation of 20 times forecast earnings per share is undemanding, and has increased its target price to 400p from 350p.

The shares currently trade at 321p.

Cantor Fitzgerald has reiterated its 'buy' recommendation for Cyan Holdings PLC (LON:CYAN) after the smart metering solutions provider announced its largest ever order, worth £10mln, from Iran.

The broker notes that the size of the order exceeds the market value of the company – or it did before the shares shot up 135% this morning, pushing the market capitalisation up to almost £23mln.

“We think that the rapid follow up to the pilot order announced in February shows that Cyan’s product is easy to deploy and is delivering its expected benefits. We think the company is beginning to gain real market traction, de-risking our investment case,” said the broker, which has a price target of a penny, still three times higher than the current share price, despite today's surge.

Petroceltic International PLC (LON:PCI) has thrown in the towel and advised shareholders to accept the 3p per share offer from activist shareholder Worldview Capital.

“With liabilities in excess of US$250mln, the 3p/shr offer values Petroceltic at US$259m or just over US$1/boe (2P). Although this clearly undervalues the assets, the company has been forced into an impossible situation leaving shareholders will little choice but to accept,” opined Mirabaud.

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