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Broker tips: Countryside Properties, JD Sports

By Iain Gilbert

Date: Thursday 18 Apr 2019

Broker tips: Countryside Properties, JD Sports

(Sharecast News) - JPMorgan Cazenove upped its stance on Countryside Properties to 'neutral' from 'underweight' on Thursday following the stock's year-to-date underperformance and a reassuring update on the earnings outlook a day earlier.
JPM said that following 17% underperformance versus the sector year to date, the stock is now more fairly valued.

"Following yesterday's reconfirmation of full year guidance, and commentary that sales rates have improved through Q2, we also see less scope for a repeat of 2018's consensus earnings cuts," it said.

JPM kept its 375p price target on the shares, noting 12% upside potential.

Countryside said on Wednesday that it had enjoyed "solid" trading in the first half and that it was on track to deliver full-year results in line with expectations.

The housebuilder and urban regenerator said total completions rose 43% in the six months to 31 March 2019 to 2,362, while the net reservation rate was at the top end of its target range and in line with the previous year at 0.86.

The company also said its total forward order book was up 49% to £1.04bn.

Analysts at Credit Suisse upped their target price on retailer JD Sports from 500p to 680p on Thursday, noting that profit contributions from the recently acquired US sneaker chain Finish Line looked set to triple over the next half a decade.

Credit Suisse said the $120bn, highly fragmented US sports distribution market, which sees the top four companies accounting for only 17% of the total market, still had ample room for expansion for a "handful of high-quality distributors" as premium brands aggressively reduce the number of wholesale accounts they do business with.

Under JD's management, CS believes Finish Line is well placed to take advantage of this.

The Swiss broker also believes Finish Line's EBIT contribution will triple over the next five years, contributing to roughly 20% of the group's overall profits by 2023.

"We increase our FINL assumptions on the back of a US market/conversion analysis and on better than expected FY19 results. We forecast 365bps EBIT margin improvement by FY23.", said CS.

The analysts also said JD's 2019 results reassured them on the international expansion opportunity, and it now expects roughly 2.5% like-for-like and around 3.5% space growth every year and a more than 200bps improvement to its operating margins over the next four years.

CS did note that JD Sports, which it also reiterated its 'outperform' rating on, still faced risks such as a slowdown in sporting goods demand, execution issues in the US and disruptions caused by a hard Brexit.


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