ASOS : In-line IMS but ex-Europe disappointing
Recommendation – Hold
Analysts – Simon French +44 (0)151 243 0974 & Karl Burns +44 (0)151 243 0976

ASOS has announced Q1 sales marginally ahead of expectations reporting 38% retail sales growth compared to consensus forecasts of 36.1%. Total sales increased 37% (consensus 36.1%) and the gross margin increased 90bps (consensus 100bps). By territory UK sales increased 37% (consensus 29.0%) and Europe increased 69% (consensus 59.0%) but US increased ‘just’ 28% (consensus 38.8%) and ROW increased ‘just’ 19% (consensus 27.8%). The group comments that the business continues to trade in line with expectations and we expect no change to consensus forecasts of c£70m PBT. This leaves the stock trading on a CY 2014E P E of 95.7x and we think the stock is at best fairly valued so reiterate our Hold recommendation.

AstraZeneca : Haven’t we been here before?
Recommendation – Sell
Analyst – Savvas Neophytou +44 (0)151 243 0973

The strong outperformance of recent months can now be quantified, with management providing long-term guidance to 2017 “revenues to be broadly in line with FY2013”; implying some $3.3bn upgrades to consensus (currently stands at $22.4bn). In our view, management is stepping onto thin ice with this same sort of guidance already attempted – and failed – this decade by previous management. We assume the upgrade can only be derived from the pipeline (according to consensus currently due to contribute some $1.4bn). In our view, a step-change from $1.4bn to $4.7bn from the pipeline is aggressive and management may be setting itself up for a fall. We have been sellers of the stock – and wrong – since November 2013 as we are not ready to take on pipeline risk in this name yet and therefore re-iterate our overall Sell recommendation.

Barratt Developments : Exceptionally strong forward sales
Recommendation – Buy
Analyst – Mark Hughes +44 (0)151 243 0965

Barratt Developments has issued its H1 trading update. Forward sales are incredibly strong YOY, +71% by value, with 150-200bps increases in net prices and margin increases, the company is in an exceptionally strong position at this stage of the year. Buy,

Countrywide : FY13 pre-close trading update
Recommendation – Buy
Analyst – Keith Baird +44 (0)20 7886 2751

Q4 was strong on the back of continued positive trends in volumes. Full year profits for FY13 will be at the top end of market expectations. In the next year couple of years we expect strong profits growth on the back of the recovering UK housing market. We remain buyers although the private equity overhang may weigh in the short term.

Michael Page : Q4 update
Recommendation – Sell
Analysts – Paul Jones +44 (0)151 243 0967 & Mike Allen +44 (0)151 243 0966

An update on the final quarter from Michael Page suggests that 2013 has finished in line with expectations. Market recovery pressure is in a similar vein to that already announced elsewhere in the Recruitment sector, and we remain bottom end of the range for 2014. Recruitment markets are clearly recovering, though we remain sceptical that the pace of this recovery will be rapid enough to justify current ratings. We leave our forecasts & recommendation unchanged. Sell

Spirit Pub Company : In-line IMS
Recommendation – Buy
Analysts – Lindsey Kerrigan +44 (0)151 243 0975 & Karl Burns +44 (0)151 243 0976 & Simon French +44 (0)151 243 0974

Spirit has announced an in-line trading update reporting 4.3% LFL sales growth for the 20 weeks to 4 January – including 7.0% for the three weeks to 4th January – compared to our forecast of 4.0% and a comparative of 2.3%. In leased pubs LFL net income increased 1.2% compared to our forecast of flat and a comparative of -2.9%. We anticipate no change to consensus expectations of £58.0m PBT. This leaves the stock trading on a CY 2014E adjusted EV EBITDAR of 8.1x, a P E of 12.7x and yielding 2.6%. We reiterate our Buy recommendation

SQS Software Quality : They finally made it to the party
Recommendation – Hold
Analysts – George O’Connor +44 (0)20 7886 2755 & Adam Lawson +44 (0)20 7886 2749

We note a pleasing tie-up with Parasoft marking SQS’ debut into virtualised testing. This technology helps companies deliver continuous testing though the application development process – we understand that users increasingly want to do that rather than ‘test as an afterthought’. Even though SQS is slightly late to the virtualisation party, it is at least now ‘in the game’. We remind that on 18 December SQS announced that it was trading in line with management expectations; recent contract wins and extensions were proof points that its strategy – focus on larger contract in six key verticals – was delivering positive results. Our FY revenue €223m compares to (Reuters) consensus €226.25 and our Adjusted PBT €12.4m compares to consensus €12.04m. To have confidence in the estimates is a big step forward as these have been a casualty of the moving strategic plates. We retain our Hold recommendation.


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