Genus Share News (GNS)

The decision by fashion retailer Next to stick to its knitting and get shot of its customer services operation, Venture, is a sensible one, in the eyes of Singer Capital Markets."Call centre operations were never truly core, and the industry remains extremely competitive," the broker asserts. "Management can now focus entirely on their core activities of retailing and sourcing," Singer added. With Next's current share buyback programme running ahead of schedule Singer has left its new earnings per share (EPS) forecasts broadly unchanged. "We estimate that the disposal and use of proceeds for buybacks is almost neutral for earnings, or possibly fractionally dilutive, particularly in the current year given it tends to be more profitable in the second half than the first half. The quantum is immaterial though," the broker said.Singer has trimmed its fiscal 2012 (the current financial year) profit before tax forecast to £559m from £565m previously, resulting in EPS of 235.3p.The following year's profit forecast is pared to £588m from £598m, and the EPS is more or less unchanged at 256.4p from the broker's previous forecast of 256.6p. Those changes mean Next trades on a price/earnings ratio for calendar 2011 of 9.8, dropping to 9.0 next year. The dividend yield is forecast to rise to 4.1% next year from a forecast 3.7% this year."The stock remains cheap but, as we expect consumer conditions to get worse before they get better, we remain on the side lines," Singer said, reiterating its "fair value" rating and 2325p price target. Panmure Gordon has raised its target price on Charter - despite thinking the engineer is in a "sorry state." Shares in Charter dived after a profit warning in last month, but quickly recovered after receiving an approach from fellow engineer Melrose. According to Panmure, Charter's "demise has provided a significant opportunity for the next owner." The broker continues: "With accelerated investment and a stronger management team we believe that its problems can be fixed (it has emerged from intensive care before) and its margin can recover to double-digit levels." Panmure also thinks that other predators may enter the fray. "Charter's welding business is a leader in territories and end-industries outside of North America and China and we would expect trade buyers to trump Melrose's first bid level," it said. Among the possible contenders it identifies are welding groups Lincoln Electric and Boehler, manufactured engineered products group ITW and liquid and gas producer Air Liquide.Genus's trading statement Monday morning was not exactly one to set pulses racing, but the animal genetics company's strong cash generation prompted Panmure Gordon to up its price target for the stock. Panmure leaves its profit forecasts for Genus unchanged, but is reducing its year end net debt forecast and increasing its price target from 1025p to 1070p. That equates to a price/earnings ratio of 21 times for calendar year 2012. Panmure still has a 'buy' recommendation on the stock. "Genus is through its heavy investment phase and cash generation has turned more positive," Panmure notes. "We are trimming our year end net debt forecast from £74.5m to £70.5m."The technical picture supports the fundamentals, according to Richard Curr, head of Dealing at Prime Markets. The advisory certificates for deposit (CFDs) broker notes that "shares in Genus have been in a rising trend channel since September 2010, with its base currently at 974p. While the price action remains above the 50-day moving average at 1,000p, shares are expected to push back past the year high at 1,049p and in line with the channel direction reach new year highs at 1,079p in the coming 2-4 weeks."Curr highlights the concerns about the imminent departure of highly respected chief executive, Richard Wood, but says Wood's successor, Karim Bitar from Eli Lilly, looks like just the man to drive the next phase of international growth. "The company has exceptional track record of growth, and even near to year highs, Prime Markets believes Genus shares are worth picking up on any weakness in the run up to the full year results at the end of September," the broker concluded.--jh