Investors calm, buoyed by Ukraine peace hopes and positive results from Shire and Rio TintoDespite conflicting influences, leading shares started brightly and managed to keep in the black for the rest of the day.Even the inability of Greece and the rest of the eurozone to settle their differences after late night talks on Wednesday failed to dent the mood, with investors hopeful a solution to the country’s financial troubles could be found before the cash runs out. The European Central Bank also soothed some nerves by extending its emergency liquidity assistance for Greek banks by €5bn to €65bn.Fourth quarter sales and earnings before interest and tax are as expected but earnings per share were 2% shy on finance/tax. Importantly the initial 2015 outlook is broadly similar to our estimates, with margin fears into the quarter likely overdone. Consensus earnings per share may need trimming slightly but this is largely confounded by a mix of pre- and post- NPS. Key pipeline programmes are on-track and the maribavir CMV Phase II update is positive.At a price of 330p per share we initiate coverage on AO World with a sell recommendation, urging investors to capitalize on the unjustified level of price appreciation over the last quarter. This is a high quality E-commerce business but the intrinsic worth of its stock is just 152p, half the prevailing market price.Our analysis shows that product protection plans significantly boost the company’s earnings potential. We calculate that the net earnings generated from protection plans formed around 51% of reported adjusted operating profit in 2014. A change in legislation or accounting policies could significantly reduce profit margins.With the completion of this initial drilling programme, [Turkish partner] Lydian has satisfied the year one spending commitment of $0.5m to acquire a 20% interest in the project. Nevertheless, we continue to believe the presence of a well-funded local partner will prove helpful in accelerating the development of the project without any dilution to Mariana at the corporate level. Continue reading...
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