Interactive Investor

Week ahead: ASOS, M&S, Sainsbury's, Trakm8, UK Budget

Monday 6 July

Telematics and data provider Trakm8 will reveal its final numbers at the start of the week.

House broker finnCap anticipates full-year earnings before interest, tax, depreciation, and amortisation (EBITDA) doubling to £2.4 million, revenue jumping 95% to £18 million and profit before tax (PBT) increasing 88% to £1.7 million.

"Given the increasing scale and rapid growth of the business, we believe Trakm8 comfortably deserves a sector peer multiple of 18x the current year's earnings and, with 10.3p forecast based on a strong order book and a blue chip client base, we reiterate our target price of 185p," says finnCap's Lorne Daniel.

Economic news

The week will open with the result of Greece's 5 July referendum asking voters whether they wish to accept creditor bailout proposals. However, Investec suggests the referendum "bizarrely" relates to the bailout which expired on Tuesday, but in reality it is a vote on Greece's desire to remain in the euro.

"There have been a number of rumours over whether the vote could be cancelled. While we are reluctant to rule out any eventuality in this respect, it seems very likely that it will go ahead as planned," says Investec, which has translated the wording of the referendum into English (see below).

(click to enlarge)

"Greece's continued membership on the single currency depends critically on a'yes' vote and on the ability for the government of the day to take quick action to alleviate the strains on the bank and financing the deficit. Markets would probably give Greece the benefit of the doubt on a 'yes' despite lingering uncertainties. Meanwhile although the integrity of the euro as a currency is much more solid than it was three years ago, a 'no' would still leave investors scrambling for cover in a flight to safety."

Trading statements

RM, Trakm8 Holdings.

AGM/EGM

Base Resources Limited, Marwyn Management Partners.

Tuesday 7 July

Investec remains positive on retailer Marks and Spencer insisting the investment case is "about the bigger picture" despite an expected negative turn for Q1 like-for-like general merchandise sales. M&S is set to publish Q1 results on Tuesday.

"While the clothing industry had difficult spring/summer weather comparable versus last year's almost ideal weather, M&S had relatively weak comps given its online platform transition issues last year. However, the early start to its sales (17 June) implies May's cooler weather didn't help and Q1 LFL may have turned negative (INVe LFLs down 1%)," says the broker.

Don't expect any changes to numbers so early in the year, according to the broker, as delivering Q3 is the key to achieving full-year forecasts.

"Valuation does not reflect business model shift to cash generation (£150 million) share buyback programme announced in May). Plus we see a material general merchandise gross margin opportunity from better buying, lower markdowns and efficiencies with upside risk to forecasts," adds Investec, which has a 'buy' rating and 620p target price.

Online fashion outfit ASOS should deliver strong Q3 numbers on Tuesday, according to Barclays analyst Christodoulos Chaviaras, who increases his target price 3% to 4,100p.

Chaviaras raises his 3Q total retail sales growth estimate to 19% from 16.5% and FY15E PBT by 3% to £47.7million.

"Demand in the UK remains robust and May's cold weather likely had a positive effect on ASOS's sales. The launch of Boohoo and Missguided on ASOS's platform helped sales in the quarter as drew incremental attention," adds Chaviaras.

The "long-term positive thesis" at ASOS is back on track and Barclays reiterates its 'overweight' rating.

Economic news

UK manufacturing output and industrial production data for May will be published on this day.

While underlying demand conditions are healthy, strong sterling should continue to weigh on manufacturing growth, according to Investec's Chris Hare.

He expects the manufacturing sector to pick up only slightly in May, to +0.1%.

"We anticipate total production growth to fall back to +0.2% - despite the pickup in factory output, we think that April's strong growth in oil output will moderate sharply."

Trading statements

Bacit, Solid State.

AGM/EGM

Summit Germany Limited.

Wednesday 8 July

Supermarket chain Sainsbury's will hold its AGM halfway through the week. Barclays examined the group's prospects in a recent note on European food retail:

Sainsbury's share price was up 9% in the last month, compared with a -2% decline for the wider European Food Retail Sector and rises of 3% and 7% for Tesco and Morrisons, respectively. We tend to think that its recent strong performance may not be merited and may dissipate or even reverse in the weeks ahead. Over the last month it has likely performed well because of the solid 1Q sales performance it reported on 10 June and some press reports suggesting a purchasing tie-up between Sainsbury's and Morrisons (eg FT, 24 June). We are sceptical that anything will materialise in terms of a tie-up and think that any related enthusiasm may drift out of the share price.

Barclays struggle to see how Sainsbury's can be materially re-rated in the near term, and therefore has an 'equal weight' rating on the stock.

Economic news

The first solely Conservative Budget in nearly 19 years will be delivered by George Osborne on Wednesday.

The team at UBS would be a "little surprised if the big picture fiscal trajectory shifted a huge amount between the March and July Budgets".

That said, UBS expects the Budget will allow the Office for Budget Responsibility (OBR) to update its forecasts for borrowing, Osborne to announce measures to bring forward some of next year's tightening into the current year and  further details on welfare spending.

"In terms of other measures announced next week, the Chancellor will also want to demonstrate that this July budget really is a distinctly 'Conservative' one rather than a product of compromise within a coalition," adds UBS.

"While there is no political imperative for vote - winning measures in the immediate future, the Chancellor also has an internal party constituency to address, given PM Cameron will be standing down at some point in the next five years and the Chancellor is a potential successor."

AGM/EGM

Active Energy Group, Palace Capital, Sainsbury's.

Thursday 9 July

Economic news

The RICS housing market survey for June will be updated on Thursday - Investec "sense" that the housing market momentum is positive once again.

Its forecast for the prices balance is that it nudges up to +35% in June.

Trading statements

SuperGroup, Mirada, NCC Group, Grafton Group.

AGM/EGM

Gulf Keystone Petroleum, AVEVA Group, Boussard & Gavaudan Holdings, Zoltav Resources.

Friday 10 July

Economic news

At the end of a busy week, UK trade in goods and services figures for May will be published.

"We are forecasting a more "normal" non-EU trade balance as imports and exports revert back towards recent trends, giving a total goods trade balance of -£9.8 billion. We look for a combined goods and services balance of -£2.4 billion from -£1.2 billion in April," says Investec's Victoria Clarke.

Trading statements

Mercia Technologies.

AGM/EGM

Graphene NanoChem, Tau Capital, Ig Seismic Services, Ilika, Aurasian Minerals.

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.