The week ahead: BT, Centrica, Derwent London

Monday 8 May

British Gas owner Centrica kicks of the week by updating the market, and investors will no doubt be looking for any outlook statements, with the general election just a month away. UBS already nailed its colours to the mast a fortnight ago by predicting that a tariff cap is more likely than not, subsequently slashing its 12-month target price by 15% to 215p and downgrading from 'buy' to 'neutral'.

Barclays also reckons a cap is likely and, applying a 52% probability of an absolute standard variable tariff price cap into its sum-of-the-parts price targets, also chops its TP for Centrica, this time from 195p to 170p.

Clearly this would be good for consumers and an electorate-friendly policy, but would be a "negative development" for Centrica, seeing as UK retail contributes around a third of operating profit, says UBS analyst Sam Arie.

Whilst calculating the impact requires estimation, he reckons it could reduce the firm's UK supply margins by £150-200 million per year.

"But we also note that a range of outcomes remain possible: in the upside case, if policy changes are benign the shares could recover to 245p. In the downside case, if margins were reduced by two-thirds, the shares could fall to 185p," he adds.

Trading Statements

Toople, Georgia Healthcare, Numis Corporation, Eckoh, Centrica

AGM/EGM

Costain Group

Tuesday 9 May

Trading Statements

Treatt, Cambria Automobiles, TyraTech Inc, Centralnic Group, Spirax-Sarco Engineering, William Hill

AGM/EGM

Non-standard Finance, Amerisur Resources, Rightmove, William Hill

Wednesday 10 May

Trading Statements

Compass Group, TalkTalk Telecoms, Warpaint London, Braemar Shipping Services, Novae Group, Vesuvius, National Express Group, ITV, Barratt Developments

AGM/EGM

Rentokil Initial, Marshalls, National Express Group, Onesavings Bank, ITV, John Wood Group, IP Group, Aviva, Anglo Pacific Group, Aberdeen Asian Income Fund, Barclays, Galliford Try, Permanent TSB Group Holdings

Thursday 11 May

After a well-publicised profits warning, shrouded in an Italy-based accountancy scandal, BT reports fourth-quarter results Thursday. The company has yet to recover from the news and is still almost a fifth lower than the late-January announcement at 308p.

UBS analyst Polo Tang reckons the bulk of the business is doing well, but investors will be looking for reassurance that certain segments – including BT Italia – are not deteriorating further.

While Tang does not expect any surprises for either full-year 2017 or 2018, he goes against consensus on 2019 figures. It's unclear whether BT will issue 2019 guidance, but Tang thinks the company will see limited growth in both cash profit (EBITDA) equity free cash flow (EFCF).

"We trim our FY19-FY21 EBITDA by 2-4% and normalised EFCF by 3.5%," he says. "This leads us to cut out price target to 305p from 325p." Post pension payments, BT offers a calendarised 7% EFCF yield, he adds, which is inexpensive but risks from higher Openreach capex and rising competition from the likes of Virgin Media persist.

A few property-focused firms also report this week, with Derwent London an interesting candidate that Barclays rates as a "top pick". By the end of last week, the property developer had grown its share price by a quarter in five months, with the London office market outlook recovering recently.

On Wednesday, Barclays raised its target price for Derwent 3% to £36, suggesting further upside of 22%. Interestingly, Derwent slipped Thursday and continued to drop Friday – around 5% to a low of 2,834p.

"The concept of absolute value can get lost in a discussion on yields and rents," explained analyst David Prescott.

"Bears might paint the picture of a precariously positioned, expensive London office market. We would highlight Derwent's £740 per square foot implied valuation as anything but.

"For a West End and tech belt portfolio operated by an experienced management team with an excellent track record, this still looks good value to us."

Trading statements

Telefonica, On The Beach Group, Porta Communications, Coca-Cola HBC, Vedanta Resources, BT Group, SuperGroup, Amec Foster Wheeler, Mondi, Galliford Try, Derwent London

AGM/EGM

Royal Bank of Scotland, TechFinancials, Starwood European Real Estate Finance, Lloyds Banking Group, Keller Group, Phoenix Group Holdings, Plant Health Care, Hill & Smith

Friday 12 May

Trading statements

Hydrodec Group, Provident Financial

AGM/EGM

Tyman, Magnolia Petroleum, X5 Retail Group, MTI Wireless Edge

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.