Sunday share tips: B&M, Aviva
By Alexander Bueso
Date: Sunday 06 Sep 2020
(Sharecast News) - The Sunday Times's Jill Treanor thinks shares of B&M are worth holding onto despite their v-shaped recovery from the worst of the Covid-19 pandemic.
Having been able to keep most of its UK stores open throughout the lockdown, the discount retailer was able to keep most of its UK stores open, albeit not those in France.
That saw the firm guide towards first half profits of £250-270m, against the £208m anticipated by analysts.
Furthermore, the outfit is still moving towards its target for 950 shops in the UK and is "showing greater evidence" that its model can work overseas, Treanor said, citing research from analysts at Barclays.
But will the new customers it attracted during the lockdown keep coming back.
Indeed, management has already conceded as much.
B&M also stands to lose its Covid-19 business rates relief next year, which is worth about £80m.
"B&M might sell bargains but the shares are not cheap. Hold."
Over at the Sunday Telegraph meanwhile. the Questor team touted the attractions of insurance giant Aviva, labelling its shares a 'buy'.
The chief uncertainty they said, was whether its new boss, Amanda Blanc, can lead a "fragile institution through a period of great change".
Over the years, the shares have acted as a safe haven, thanks to the firm's generous dividend payout, but that had also left to reinvest in the business, Questor pointed out.
The payout may not be as "generous as it used to be but if Aviva can still yield 7pc in future, that will be good enough in the context of a FTSE 100 where income is scarce", it added.
Uncertainty around the dividend may be holding the shares back.
As well, its operations in France, Poland and beyond may be sold or run off over time, while Aviva focuses on the UK, Canada and Ireland.
In total, the value of the businesses tipped for disposal was roughly £7bn, a figure that was not recognised in the share price, the tipster said, citing analysts from ShoreCap.
Furthermore, trading on a price-to-earnings multiple of less than five, the stock was not expensive.
The company is also better capitalised than rivals and its balance sheet is strong after the purchase of Friends Life.
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