From UK-Analyst.com: Tuesday 13th July 2010

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Sir Alan Budd apologised for undermining the credibility and apparent independence of the Office of Budget Responsibility after two weeks in which the new office has been plagued by leaks and accusations of partisanship. Meanwhile, the falling cost of petrol and diesel fuel helped U.K. prices to rise more slowly in June than the month before, but at 3.2% the overall level of price inflation remains well above that considered desirable by monetary policymakers. Elsewhere, the U.S. trade gap widened unexpectedly in May as a jump in imports from China pushed the deficit to its highest point since November 2008.

At the London close the Dow Jones was up by 168.47 points at 10384.74 and the Nasdaq was up by 38.64 at 2237.

In London the FTSE 100 finished up 104 points to 5271.02; the FTSE 250 was up by 164.24 points to 9938.4; the FTSE All-Share was up by 51.34 points at 2720.03; and the FTSE AIM Index was up by 5.04 points to close at 671.79.

Brokers' Notes

GE&CR reiterated its "BUY" recommendation for AdEPT Telecom* (ADT), and 40p target price, following the voice and data telecommunications services provider announcing underlying  EBITDA and pre-tax profit that were in line with the research house's forecasts. The company reported adjusted EBITDA of 3.61 million pounds and an underlying pre-tax profit of 2.22 pounds million, up from 3.52 million pounds and 2.06 million pounds, respectively, despite a 10% decline in revenue to 25.73 million pounds. Despite total revenues expected to decline again this year, GE&CR believes there is growth within the company, citing the company's consistent, proven ability to generate strong cash flows as the key to its investment case. The shares remained unchanged at 21p.

Collins Stewart issued a "BUY" recommendation for Game Group (GMG), with a 102p target price. Game hosted a technology event, showcasing some of the new product coming into the games market over the next six months. Given a UK video games market that has declined by 16% in the first half of 2010, there was some evidence of improving momentum, with a pipeline of innovative new products. Clearly, the market remains tough, and VAT increases in the new year will not help, Collins commented. Nevertheless, new technology has always been the key drive for the video games sector and these new products should help reassure investors of the level of technological innovation. Game shares rose by 5.15p to 67.4p.

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Seymour Pierce reiterated its "BUY" recommendation, and 78p target price, for Griffin Mining (GFM), following the firm's recent production update. Overall, the Caijiaying mine is performing well and looks to be on track to meet its full year production targets for zinc, gold and silver as the ramp up continues. With the mine and plant expansion due to be completed next month the company should meet the broker's full year targets. Even though, lead production in the first half is well below Seymour's expectations, the broker sees this as a minor concern in terms of revenue against the other metals produced. The shares moved up by 3p to 46.25p.

Panmure Gordon upgraded its recommendation on Capita (CPI) from "HOLD" to "BUY" as well as increasing its target price from 750p to 885p. The broker is a fan of the support services company and firmly believes its organic growth profile should gather positive momentum in the 2011 and 2012 financial year, as the private sector shows signs of recovery. As such Panmure would expect its valuation to move back towards previous historical trends, and, at current levels, it believes the potential rewards more than outweigh the risks. Capita shares increased by 16p to 758.5p.

Blue-Chips

BP (BP.) shares climbed up by 10.6p to 409.55p after news that the oil giant has successfully fitted a larger containment cap on the leaking Gulf of Mexico well.. The group will run a series of tests on the new cap to see whether it can halt the flow of oil, diverting the entire stream to ships on the surface. BP added that it can not assure that the sealing cap system, which has never been deployed under these conditions, will contain the oil and gas.

Burberry Group (BRBY) shares rose by 29.5p after the company beat market forecasts with a 24% rise in first quarter underlying revenue. The 154-year old maker of raincoats and handbags said it made 282 million pounds of revenue, excluding a restructuring at its Spanish arm, in the three months ended June, led by growth in Asia and the rest of Europe. Sales at the group's retail outlets rose an underlying 16%, including 10% increase at shops open at least a year, while wholesale revenue leapt an underlying 46%, helped by a pull forward of orders into the first quarter. The firm added that it plans to open between 20 and 30 stores in the current financial year, predominantly in the Americas and Asia Pacific. Evolution Securities believes forecasts are likely to move up for the financial year to "justify the premium share price rating." Consequently, the broker increased its target price from 740p to 780p, maintaining its "NEUTRAL" recommendation.

AMEC (AMEC) shares moved up by 11p to 882p on news the engineering and project management company, as part of the AMEC Tekfen Azfen (ATA) consortium, has been awarded a five-year Master Services Agreement by BP Azerbaijan. The five-year agreement for the ATA consortium covers the provision of project management, engineering services, construction management and commissioning and completions for BP's oil and gas projects in Azerbaijan.

Read Evil Knievil's latest diary entry here

Mid-Caps

Dunelm Group (DNLM) shares increased by 20.7p to 378.7p subsequent to the home-wares retailer announcing that it anticipated operating profit will be ahead of market expectations. The group reported sales at stores open at least a year rose by 0.8% in the second half of its financial year, down sharply from 15.4% in the first half. The gross profit margin rose by 190 basis points to 46.8% over the full year ended 3rd June, due primarily to "successful management of old stock", the group said. Denelm, however, warned of tougher times ahead, as Britain takes steps to reduce the state deficit. Collins Stewart continues to like the firm's cash generative nature and strong balance sheet, reiterating its "BUY" recommendation.

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Cranswick (CWK) shares climbed up by 3.5p to 863.5p after the meat processor announced starting the financial year in line with expectations. The group reported total sales of 198 million pounds for the three months to 30th June, which is 19% higher than the previous year. During the period most categories delivered strong growth reflecting higher volumes. Regarding the financial position, the company reported strong cash flows, with net debt standing at 54 million pounds, which is 10 million pounds lower than that a year ago. This was as a result of making substantial capital investment over the past year, the firm added. Panmure Gordon continues to believe that the company remains well positioned to deliver further growth but views the shares as fairly valued at current levels, and thereby moved its recommendation from "BUY" to "HOLD", whilst maintaining its 880p target price.

Balfour Beatty (BBY) shares rose by 6.4p to 252.6p following the construction company's Mansell subsidiary being appointed as one of the three contractors to a 220 million pound four year framework. The programme will involve investment in existing housing stock and maintenance, including external works and internal modifications, to residential properties across the London Borough of Hackney. Mansell's share of the framework will be worth approximately 73 million pounds.

Small Caps, AIM and PLUS

Pinnacle Telecom Group* (PINN) shares edged forward by 0.01p to 0.29p after the integrated telecommunications solutions provider was awarded a one-year contract valued at 0.75 million pounds. The group won the contract to supply an integrated solution of 30 million minutes of inbound and outbound voice calls, and fixed line services to Grass Roots Group, a performance improvement company. The contract is estimated to generate 750,000 pounds of annual revenue, commented CEO Alan Bonner.

Electrical components supplier Cinpart* (CINP) announced that it has secured new sale contracts for its voltage optimisation product, VoltageMaster, worth 375,000 pounds. The units are now under construction, and installation, which will be carried out by Cinpart's strategic partner, Southern Electric Contracting, is expected to be completed by the end of September 2010. The shares moved forward slightly by 0.75p to 9.5p.

African Minerals (AMI) has agreed to sell 25% of its flagship project in Sierra Leone for 1.5 billion dollars (0.99 billion pounds) to a Chinese steel company, Shandong Iron & Steel. News of the latest deal, which involves a three-stage investment and an agreement for Shandong to buy 10 million tonnes of iron ore per year at discounted prices, sent the shares soaring up by 53p to 438p. The company added that when completed, this strategic investment will allow it to accelerate the development of the project at Tonkolili.

Gooch & Housego (GHH) shares climbed up by 35p to 258.5p after the optical components and systems manufacturer announced an increase in managements’ expectations for the year ending 30th September 2010. This follows the implementation, in the second quarter, of a number of initiatives to significantly boost manufacturing capacity and reduce lead-times. These initiatives have now begun to take effect, the group reported, with increased output and falling lead-times, despite continuing high levels of order intake. The order book at the end of June stood at 22.1 million pounds, an 11% increase on the figure at the end of March.

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Webis Holdings (WEB) shares edged back by 0.37p to 1.13p as the on-line gaming group issued a profit warning, saying that trading for the full year will be significantly below previous expectations. This comes after the group's sportsbook operation, betinternet, recorded a substantial operating loss for the financial year ended 30th May 2010. The group concluded that, following the conclusion of the World Cup, the board is "reviewing its strategy for the sport book as a whole."

Luminar (LMR) shares declined by 1p to 10.5p subsequent to the nightclub operator reporting a "challenging" period. In a trading update, the group said same outlet sales across 76 clubs were down by 19.9% in the 19 weeks to 8th July, with admissions revenue down 26%. Already suffering the effects of rising unemployment in its key youth market, Luminar said the World Cup knocked an additional 6% off its sales. The nightclub operator added that it continues to be cash generative and expects new debt to be reduced at the half year. Nevertheless, Panmure Gordon lowered its profit before tax forecast and re-iterated its "SELL" recommendation, with a reduced target price of 6p.

Low & Bonar (LWB) shares fell by 3.75p to 39.75p despite news the fabrics and flooring products maker reported a pre-tax profit, reflecting strong sales. In the half year results, the firm reported profit before tax at 7.9 million pounds in the six months to 31st May, compared to a pre-tax loss of 5.8 million pounds in the same period a year ago. This has been attributed to strong sales growth, which rose by 11.7% to 155.8 million pounds. Consequently, Low & Bonar reinitiated its interim dividend at 0.5p per share, reflecting the group's confidence in the trading outlook. The firm has maintained its view that trading was better than original expectations for the full year.

PLUS-quoted company Datum International (DATP) announced that it is confident of continued strong trading, as it expects revenue to increase by over 100%. In a trading update, the software company, specialising in content management, also said that it “expects to announce maiden profits for the year” ended 30th April 2010. The company added that, post year-end, it has made further progress, in particular the integration of Root 3 - a Bristol based document capture business – now provides capabilities to win projects of a "significantly higher value than was previously possible." The shares rose by 0.5p to 9p.

* Cinpart, Pinnacle Telecom Group and Adept telecom are corporate clients of Rivington Street Holdings (RSH), the ultimate owner of this website. The SF t1ps Smaller Companies Growth Fund, which is managed by a subsidiary of RSH, owns shares in Cinpart.