The week ahead: Sky, Paragon, IG Group

Monday 23 January

Trading statements

Computacenter, Petra Diamonds

AGM/EGM

Kimberly Enterprises

Tuesday 24 January

With regualtors cracking down on high-risk trading instruments, IG Group earlier this month wreassured the market its business isn't under threat.

The FTSE 250 constituent is the UK's largest spreadbetting company and, as regulation has always been the key risk, analysts at Barclays are confident enough to say "maximum uncertainty has now passed".

Uncertainty over revenue and earnings is high, however. The investment bank reckons sales will halve in the UK in IG's 2018 financial year, but believe the use of limited risk accounts in Germany and France offset regulatory uncertainty in the regions.

Most markets should still enjoy growth in 2018, benefiting from its market lead and strong 40% return on capital. Its cash generation also underpins a 4.7% yield.

Barclays analyst Richard Taylor has cut his earnings forecasts by 29%, pencilling in a 24% slump to 35.8p in 2018.

"It is difficult to have strong conviction when the potential earnings per share (EPS) outcomes are so wide and further regulation may hit," explains Taylor.

"However, if earnings trough in FY 2018E this hardly seems a poor investment case if regulation risk has peaked and [contracts for difference/CFDs] remain an attractive way to trade financials using leverage.

"We lower our price target to 612p based on a price/earnings of 15x FY 2019E EPS (adding net cash) and maintain our overweight rating."

Trading statements

PZ Cussons, IG Group Holdings, Blue Prism Group, Lakehouse, easyJet, Dixons Carphone, Genel Energy, BHP Billiton

AGM/EGM

European Investment Trust

Wednesday 25 January

Trading statements

Restaurant Group, Antofagasta, Fresnillo, WH Smith

AGM/EGM

Polo Resources, Patisserie Holdings

Thursday 26 January

Rupert Murdoch confirmed 21st Century Fox's £11.7 billion bid for broadcast media group Sky at the end of last year, the media tycoon's second attempt. He already owns a 39% slice of the Sky pie and must now convince three-quarters of his shareholders to back the bid. Thursday's second-quarter results will be interesting.

UBS is expecting underlying revenue to be up 5.5%, with the UK up 5%, Germany rising 9% and Italy growing by 3.5%. Unfortunately, a step-up in the cost of Premier League rights will mean this momentum doesn't make it to the bottom line, and operating profit is expected to fall 10% to £673 million in the quarter. Programming and marketing costs will be weighted towards the first half.

Include European investment and the launch of Sky Mobile, and 2017 should be the profitability "pinch point" as capital expenditure reduces into 2018. With revenues benefiting from these investments, UBS expects £1.81 billion of operating profit in 2018 and EPS of 74p, up from £1.46 billion and 57.6p respectively. By 2020, EPS could be over 100p.

"We see the 1,075p offer price from Fox as a floor rather than a ceiling, with scope for Fox to potentially raise its bid should Sky see improving operating momentum over the coming quarters," says UBS analyst Polo Tang. He rates the shares a 'buy' with a 1,370p target price.

Trading statements

Sky, Unilever, Renishaw, ITE Group, Diageo, CPL Resources, Rank Group, RPC Group, Sage Group, St James's Place, SSP Group, Card Factory, Euromoney Institutional Investor, Daily Mail and General Trust, Diageo, Anglo American, Kaz Minerals, Whitbread, Lonmin, PayPoint

AGM/EGM

Grand Group Investment

Friday 27 January

Paragon's share price has flown since the beginning of July, with the finance group's shares surging by over three-quarters to 406p. The group has three main businesses; Paragon Mortgages, Idem Capital, and Paragon Bank. With another solid trading statement expected on Friday, its rally should still have further to run.

After recent Stamp Duty changes, Buy-to-Let volumes have now stabilised - although the group is focusing its priorities towards other asset classes. The £50 million share buyback has started, but with surplus capital still in the pot, investors will want to how the group intends on spending it in 2017.

With a price/earnings (PE) multiple of 10x and a yield of around 3.6%, the shares "are still not expensive", says Peel Hunt analyst Stuart Duncan. He reckons they are worth 460p, which implies 13% upside.

Trading statements

BT Group, Aberforth Smaller Companies Trust, Kcell, Paragon Group of Companies

AGM/EGM

Nektan

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.