The UK-Analyst Stock Market report on Wednesday 7th July 2010: featuring Marks & Spencer, Robert Walters and Clinton Cards
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From UK-Analyst.com: Wednesday 7th July 2010
Brand new tip this week on
t1ps.com The European Parliament has approved a deal placing new limits on bankers' bonuses from next year. Under the deal agreed by the EU members, bankers will receive no more than 30% of their bonus immediately and in cash, a limit that falls to 20% for larger bonuses. Remaining payments will be deferred and linked to long-term performance. Meanwhile, unemployment levels worldwide are set to remain high amid increasing fears that some elements of joblessness could become entrenched and even more difficult to solve, the Organisation for Economic Cooperation and Development (OECD) warned. At the London close the Dow Jones was up by 120.26 points at 9,863.88 and the Nasdaq was up by 23.56 at 2,117.44. In London the FTSE 100 climbed 49.82 points to 5,014.82; the FTSE 250 moved up by 61.59 points to 9,562.68; the FTSE All-Share rose by 23.94 points to 2,593.21; and the FTSE AIM Index finished down by 0.78 points to close at 656.23. Brokers' Notes Charley Stanley Securities initiated coverage of Easy Jet (EZJ) with a "REDUCE" recommendation and 334p target price. The research house said that further expansion will only create shareholder value if the new aircraft achieve a profit before tax per seat greater than anything the company has ever previously managed. To do so will require for many conditions to be met, such as the firm's 190 million pounds cost reduction programme to deliver as planned as well as the absence of any unforeseen "one-off" events. The share price implies that all these conditions will be met; and thus, Charley, believes there to be "substantial" downside risk. Easy Jet shares moved up by 4.6p to 404.2p. Evolution Securities retained its "BUY" recommendation for Cineworld (CINE) and increased its target price from 210p to 235p. The stockbroker commented that the cinema operator's recent deal with Arts Alliance Media is more than just a 10-year financing package. It will help to move the company to 100% digital projection by spring 2013, which will offer real revenue opportunities from the growth of 3D films. This combined with the success in gaining new sites, increases the upside risk that the stock market will rate the firm as a growth stock rather than an income stock, the research house concluded. The shares edged back by 0.25p to 193p. How to find the best small cap bargains Collins Stewart reiterated a "BUY" recommendation for WorldSpreads Group (WSPR) and 125p target price. This follows better than expected results for the financial year in 2010 and forecasted profits in 2011, which the research house believes isn't reflected in the spread betting company's valuation. Collins goes on to say that the current market valuation of 29 million pounds is "very low" for a business that generates a "normalised" operating margin of over 20% and demonstrates "high" revenue growth prospects. WorldSpreads shares stayed put at 74p. Panmure Gordon reiterated its "BUY" recommendation and 8p target price for Electric Word (ELE). The research house made no changes to its 2010 financial year expectations after the public sector management information company stated that "current trading is in line with the board's expectations." In the context of ongoing concerns over public sector spending, Electric anticipates "great opportunities" in education as a result of the increased need for management information for schools. The shares were unchanged at 4.13p. Blue-Chips Autonomy Corporation (AU.) shares increased by 16p to 1,848p after the infrastructure software company announced that it has been awarded a seven figure purchase order. The order was placed by the U.S. government to utilise Autonomy Intelligent Data Operating Layer technology (IDOL), as part of what’s expected to be a multi-million dollar project. Meanwhile, the UK-based group also announced that it has entered into a “significant” license agreement with the U.S. food company Kraft Foods to license IDOL.
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download a preview of the magazine Marks and Spencer (MKS) shares fell by 9.3p to 343.4p despite the British retailer posting a third consecutive rise in underlying quarterly sales. Britain’s biggest clothing retailer said sales at British stores, open at least a year, rose 3.6% in the 13 weeks to 3rd July 2010; total U.K. sales was up by 4.8%. However, following the recent Budget and the actions proposed to reduce the national deficit, including the increase in VAT, the group is cautions about the outlook for consumer confidence and spending. While the shares have recovered strongly since 2008, Ambrian believes that the current valuation is still "too low" and this is reflected in the research house's "BUY" recommendation and 576p target price. Tullow (TLW) shares rose by 25p to 1,108p on news that the government of Uganda has approved the 1.35 billion dollars (0.89 billion pounds) sale by Heritage Oil & Gas of its 50% interest in Blocks 1 and 3A to the group. The agreement had been delayed by a dispute over whether Heritage should pay capital gains tax to the government on the sales of its stake in two oil licenses in the Lake Albert oil field. However, the deal is still conditional upon resolution of the tax issue and could include arbitration in London, Heritage said in a separate statement. The deal will give Tullow 100% of the Lake Albert licenses, but it plans to quickly sell on a third of these licenses to Total and China National Offshore Oil company. Westhouse Securities believe there is enough common ground between Heritage and the government to allow the deal to complete in the time frame suggested. The research house has, therefore, maintained its "BUY" recommendation. Mid-Caps DS Smith (SMDS) shares moved up by 2.5p to 128.5p following the packaging and office products wholesaler submitting an offer to acquire Otor, a corrugated packaging company in France. Under the terms, the wholesaler intends to acquire control of more than 95% of the firm’s share capital for a total consideration of 247 million Euros (206 million pounds). It will be funded through a combination of existing and new committed bank facilities, and the proceeds from a placing of up to 9.99% of new share to raise 47 million pounds. Smith DS commented that the proposed acquisition will enable DS Smith to meet the "increasing requirements of European retailers for enhanced packaging products."
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Report! Click here and find out how VectorVest values companies in your portfolio. Carillion (CLLN), the support services and construction company, saw its shares edge back by 0.6p to 313.3p despite the group saying it has continued to perform well in the first six months of 2010. Underlying earnings per share are expected to increase, more than offsetting the effects of disposing of two non-core businesses - Enviros and IT services - and the sale of four investments in Public Private Partnership projects in 2009. Nevertheless, as a result of the business disposals and equity sales, the support services company said that revenue will be lower than in the corresponding period in 2009. Consequently, the company continues to expect market conditions to "remain challenging." Panmure Gordon remains positive as the research house reiterated its "BUY" recommendation, with an increased target price from 300p to 350p. Aquarius Platinum (AQP) shares dropped by 21.2p to 293.6p subsequent to confirming that five employees of the mining contractor, Murray and Roberts Cementation, have died at the Marikana platinum mine 4 shaft. A sixth person has been hospitalised but is not in a life-threatening condition, whilst a seventh sustained minor injuries. A recovery operation is underway. Small Caps, AIM and PLUS Anglo Asian Mining (AAZ) shares went up by 2p to 18p following a positive update on operations at the company's flagship Gedabek mine in Azerbaijan. The gold producer reported record quarterly gold production figures of 14,836 ounces and total production for the first year of operation of 39,858 ounces, which exceeded the company's 25,000 ounces forecast. In line with continued production efficiencies, Anglo is confident of hitting its production target for the financial calendar year of 53,500 ounces. SeaEnergy (SEA) shares rose up by 4.75p to 23.25p after its 80% subsidiary SeaEnergy Renewables and Chinese company Nantong COSCO Ship Steel Structure signed a Strategic Cooperation Agreement (SCA). The SCA is expected to lead to a definitive agreement to develop and market turbine jacket substructures, towers and access systems for offshore wind farms. Both companies believe that combining their expertise and resources will allow them to benefit jointly from the opportunities in the offshore wind industry.
Do you have any gold exposure in your
portfolio? Robert Walters (RWA) shares climbed up 43.5p to 238.75p as is was reported that flocks of bankers have won new jobs in the City. The recruiter, which has operations in Europe, Asia-Pacific, the U.S. and South Africa, said increased demand for jobs in the financial sector helped boost net income for the second quarter by 36% to 11.6 million pounds in Britain. Nevertheless, concerns over the health of the British economy and its impact on employment still meant that there is some uncertainty about market conditions in Britain. After recent share price weakness and encouraging results, Panmure Gordon switched its recommendation from "HOLD" to "BUY", maintaining its 230p target price. Great Eastern Energy (GEEC) shares dropped by 45p to 440p after the Indian natural gas explorer posted pre-tax losses. For the year ended 31st March 2010, turnover increased from 40 million Indian rupees (0.6 million pounds) to 157 million Indian rupees (2 million pounds), due to increased gas sales. The energy company, however, posted pre-tax losses of 331 million Indian rupees (5 million pounds), up from 317 Indian rupees (4 million pounds) the year earlier, as a result of the large cost attributed to the new distributional pipeline. Now that this has been completed, the group can now focus on increasing production and on securing additional sales agreements, the firm added. Trading at a 36% discount to Arden Partners' 757p target price, the research house issued a "BUY" recommendation.
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ALTERNATIVE! The building materials group CRH (CRH) shares fell by 100p to 1,605p on news pre-tax profit is expected to breakeven for the six months to June 2010. This compares to a profit of 100 million Euros (83 million pounds) a year earlier. Analysts at Davy Stockbrokers said they had been expecting a profit before tax of 60 million Euros (50 million pounds), citing CRH's Americas materials unit for the shortfall. The group also said business conditions are beginning to get more difficult, with concerns over deficits clouding the euro-zone outlook and recent U.S. economic data pointing to a "softening" of the recovery. Consequently, Collins Stewart sees the firm trading at a substantial premium to the sector average; and thereby issued a "HOLD" recommendation and 20 Euros (17 pounds) target price. Clinton Cards (CC.), the greeting cards retailer, announced that the group's adjusted operating profit for continuing operations will be similar to last year, which stood at 24 million pounds. Total sales are expected to be about 2% behind the board's previous expectation, impacted by the disproportionately poor performance in 13 stores trading in southern Ireland. The company added, however, that it continues to work with significant headroom across all of its banking covenants. The shares declined by 2.75p to 36p.
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