Jonny Smith's Shares

Quiet week on the FTSE with Severn Trent and AVEVA looking good investments

Last Week’s Roundup: Last week saw SSE announce their profits rose by 9.6 per cent, which was largely due to the price hikes discussed in last weeks article. The price rises were to cover outstanding costs and help preserve the longevity of SSE, but following this positive news about profits their share price declined on Wednesday. Investors will be concerned due to Ofcom tightening the regulations on utility prices meaning their share price declined by 2.17 per cent last week. Vodafone also witnessed a share price decline by 4.62 per cent this week after some poor press recently and investments in improving their network saw profits decline in last week’s interim results. Royal Mail’s share price declined by 7.82 per cent due to concerns over competition from other parcel firms in terms of custom, but the UK stronghold of parcel delivery is still a long-term investment

Moving on from last week, the market is going to be pretty quiet this week with only a handful of result announcements in the UK plus the politics may have an effect on the share market in terms of Europe. Severn Trent Water have their end of year results on Thursday. They are expected to report £16 million growth compared to this time last year, but financial costs along with a higher tax charge have significantly eaten into this profit. Severn Trent’s management remains very confident in their business plan with further discussions on the investment requirement. Though the company has recently received some bad press after been fined £35,000 for polluting a lake in Lincolnshire, and blocked sewers are thought to be costing Severn Trent over £1 million a year.

Citigroup last month had placed a price target of 1,750p, which is a decrease of 9.9 per cent compared to the current share price of 1,924p. Severn Trent has a year high of 2,200p and a low of 1,612.46p, but there is scope for potential investment, as last month the company saw a rise of 7.25 per cent. The company is still way off its year high so this could make them a long term investment proposition, as there will be always a demand for their services in the utility market.

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AVEVA group, an engineering software company, release its end of year results on Tuesday and sales for the year are forecast to reach £237 million lower than expected, which is worrying news for investors. AVEVA expect to announce eight per cent growth over the full year, but multiple warnings coming from contractors who have placed concerns over the company’s products. However, more positive news is that AVEVA expanded its network to Hyderabad, as India has a big demand for their products and this business expansion will support the development of new products.

Market analysts Goldman Sachs improved their price target on AVEVA with a rise of 50p from 2,950p to 3,000p, which is an upside of 38.8 per cent from the company’s current share price of 2,161p. Numerous other analysts from Panmure Gordon and Westhouse securities have placed a ‘buy’ rating on the stock, which demonstrates market confidence in the engineering company. AVEVA has a year high of 2,753.07p, and a year low of 1,893p, but over the past month their share price has risen by 11.33 per cent, which was largely due to the expansion in India.

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Overall, Severn Trent Water and AVEVA have the potential to produce a good yield according to market analysts, but their end of year results are going to play a vital part in achieving market analysts share price targets.

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