Marks & Spencer Share News (MKS)

(ShareCast News) - Liberum initiated coverage of Royal Mail at 'sell' with a 360p price target, saying its recommendation is predicated on the long-term decline in letter volumes continuing and not being offset by growth in the parcels market.The brokerage said parcel growth is likely to favour RMG's competitors. It sees the fastest-growing segments of the parcels market being premium offerings where Royal Mail is not as strong compared with the slower deferred market.It noted that Amazon's creation of an in-house delivery capability has also cut market growth and seems unlikely to be reversed.As far as the company's cost cuts are concerned, it expects the savings to barely offset the decline in revenue, with even this dependent on the next collective bargaining deal with the trade unions.Future pension provision will also have to be agreed, with some risk of a one-off contribution or higher ongoing costs, said Liberum.In addition, it said the uncertainty over Royal Mail's future regulation, which is currently being reviewed by OFCOM, presents asymmetric risk, with no change being the best scenario but a more onerous regime possible."Although the group trades at a discount to its European national postal operator peer group, we consider this discount to be warranted by the modest growth outlook and risks faced by Royal Mail." Marks & Spencer was given a 'buy' rating but its target price was lowered to 570p from 590p by Investec after the company reported its third quarter trading update.The retailer said while it enjoyed its best ever Christmas for food sales, general merchandise sales slumped 5% and like-for-like (LFL) sales by 5.8%, which analysts said implied in-store sales were down in high single digits.As a result, total group sales were entirely flat for the 13 week period to 26 December, having risen 1.4% in the first half of the year.The womenswear division's tribulations were blamed on unseasonal weather condition."With weak comps, 3Q16 was supposed to be the quarter when M&S' finally demonstrated general merchandise was back on track," said Investec analyst Kate Calvert."However, in keeping with others, the weather has spoilt the party, though self-help & a more flexible business model has limited the profit impact."M&S also announced that chief executive Mark Bolland will retire this year and hand the baton to well-regarded general merchandise chief Steve Rowe."He has significant experience across the whole business having also run the Food division and store operations historically and his appointment is likely to be well received in our view," Calvert said.Calvert added that the cut to the target price was based on peers de-rating of the stock to calendar year 2016 price to earnings ratio of 11.6.However, she said the de-rating "seems excessive given M&S is capable of delivering double digit TSR through a combination of profit growth driven by self-help & capital return programme". While China's stock market jitters spark a widespread equity sell-off, especially around emerging markets, Capital Economics remained convinced they will bounce back once these fears ease.Though he admits these fears may persist for a while, senior markets economist David Rees said the latest sell-off in equity markets in the emerging world was largely due to bad communication by Chinese officials, as many EM economies were showing some signs of improvement.Thursday saw the second 7% fall in China's stock indices in the week, again setting off the new circuit-breaker mechanism, again sparked by the People's Bank of China lowering its daily fix for the renminbi/dollar exchange rate by 0.5%, reinforcing fears of a competitive devaluation.Admitting he had been out on a limb for some time in predicting that EM equities will perform well this year, Rees stuck to his view for several reasons.First, that poor communication by the central bank was at fault rather than a deliberate devaluation."Last month's announcement of a new trade-weighted basket for the renminbi appeared to signal a shift to managing the currency against a basket of others, rather than solely against the dollar. But this was never explicitly announced, while the PBOC is only publishing the basket on a weekly basis."He suggested the large gap that has opened up between the onshore and offshore yuan implied the PBOC was still supporting the renminbi, an idea backed up by the record US$108bn decline to US$3.3tn in foreign exchange reserves last month that was also reported on Thursday.Rees' second argument was that equity markets in China are not a good barometer of the health of the economy, with the 7% daily falls in equity prices by no means evidence that the economy is contracting more sharply."Indeed, while there was a small decline in the December Caixin/Markit manufacturing PMI, one point that was glossed over on Monday is that at 48.2 it is still consistent with manufacturing growth of around 8% y/y. And other indicators have been more positive."As such, he still expects the Chinese economy to perform "reasonably well" this year and that other EM economies, outside of commodity producers such as Brazil and some in Africa, seem to have turned the corner and many, like India, ASEAN, Central Europe and even China, will benefit from lower commodity prices.