Thursday's Stock Market Report from UK-Analyst: featuring Rio Tinto, GlaxoSmithKline & Mothercare
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From UK-Analyst.com: Thursday 15th July 2010
How to find the best small cap bargains Crime fell by 9% last year, according to official figures, scotching fears of a "recession crime wave" and casting further doubts over Conservative pre-election claims that British society is "broken." Elsewhere, the Federal Reserve cut its 2010 growth forecast for the first time since the economic recovery began last year, as debate at the central bank turns from when to tighten policy to whether to ease it further. Meanwhile, the Chinese economy grew at 10.3% in the second quarter, down from the previous three months, as government efforts to cool the housing market and infrastructure investment began to bite. At the London close the Dow Jones was down by 88.62 points at 10,278.1 and the Nasdaq was down by 18.57 at 2,231.27. In London the FTSE 100 was down by 42.23 points to 5211.29; the FTSE 250 was down by 43.16 points to 9852.45; the FTSE All-Share was down by 19.98 points at 2690.6; and the FTSE AIM Index was up by 2.1 points to close at 675.93. Brokers" Notes Ambrian reiterated its "BUY" recommendation for its "top pick" Rio Tinto (RIO), while lowering its target price from 4,700p to 4,300p. The broker expects the mining giant to report earnings close to that in the 2009 financial year, as it revises its earnings per share forecast down from 680 cents (446p) per share to 583 cents (382p) per share. The price target has been lowered on the back of some heavy reductions in its iron ore price forecasts in the fourth quarter of this year, Ambrian commented. Nevertheless, it expects Chinese demand for iron ore to recover into 2011, driving prices back up. Rio shares dropped by 104p to 3,030.5p. Arbuthnot reduced its recommendation for materials science company Cookson Group (CKSN) from "BUY" to "NEUTRAL", and reduced its target price from 605p to 465p. Following "softening" steel prices and steel plant utilisation, the stock broker does not expect steel demand to continue to grow in the second half of 2010. It is believed that gross steel consumption is closely related to economic activity, which, therefore, has a wider implication than the immediate prospects for the steel industry. When Cookson announces its first half results in August, Arbuthnot is expecting it to show a "very convincing recovery" but still considers it prudent to delay purchasing the shares until the outlook becomes clearer. The shares moved back slightly by 1p to 431.3p.
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Report! Evolution Securities issued a "BUY" recommendation for Dairy Crest (DCG) with a 425p target price. The broker expects the dairy food producer to report "continued steady progress" from both its branded foods and dairies businesses when the company publishes a trading statement on the 20th July. Evolution forecasts profit before tax growth of 5% in the 2011 financial year compared with the previous year. This is expected to be driven by core food brands, dairy products and lower finance costs as a result of last year"s significant debt reduction. In its view, this progress has yet to be fully reflected in the firm's rating, which it believes should be on par with its peers, Wiseman and Cranswick. The shares edged up by 1.6p to 396.6p. Edison Investment Research reported on Praesepe (PRA) following visiting the U.K based gaming company's operations in Northampton and Kettering. The research house believes that the firm has "significant medium-term growth potential" as a consolidator in the UK/European low-stake high volume gaming market. Investors are backing a highly experienced management team, while, at the same time, Edison expects further acquisitions in due course. Even though trading conditions remain tough, integration synergies should deliver profits as the business scales up. Praesepe shares stayed put at 6.63p. Blue-Chips Experian (EXPN) shares climbed up by 15.5p to 649p as the global information services company reported "good growth with improved performance across all its geographies." Total revenue from continuing activities increased by 7%, at constant exchange rates, in the three months to June 2010, with organic revenue growth of 6%, year-on-year. Commenting on the performance, CEO of Experian Don Robert said that the company is benefiting from strong execution across the globe. For the first half of the financial year, the group is targeting mid single-digit organic revenue and EBIT growth from continuing activities at constant currency. Encouraged by this, Evolution Securities retained its "BUY" recommendation and 767p target price.
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companies GlaxoSmithKline (GSK) shares increased by 21.5p to 1,203p on news that the U.S. Food and Drug Administration voted to allow the diabetes drug Avandia to remain on the market, despite a variety of studies showing the drug poses elevated risks of heart attack. In a separate announcement, the British drug maker announced that it expects to record a legal charge of 1.57 billion pounds for the second quarter of 2010. The charge would cover not only settlements for Avandia but also other long-standing legal cases, including an investigation into its former factory at Cidria in Puerto Rico and anti-trust litigation over antidepressant. Expecting continued emerging market growth, Collins Stewart reiterated its "BUY" recommendation and 1,182p target price. Tullow Oil (TLW) shares rose by 8p to 1,143p after the oil and gas company announced that the Nsoga-5 appraisal well, which is located in the Butiaba region of Uganda Block 2, has successfully encountered 10 metres of net oil pay. The Nsoga-5 appraisal well was drilled to a total depth of 587 metres. Mid-Caps Mothercare (MTC) shares fell by 22p to 530p following a below par performance in the U.K. market. |The mother and baby products retailer, which makes three quarters of its sales in Britain, said revenues at U.K. stores open at least a year fell 4.1% in the first quarter of the financial year. The news offset a 20.3% rise in overseas sales. Commenting on this, Reuters said that Britain's retailers are worried that steps to cut government borrowing, such as higher taxes and public spending cuts, will hit consumer demand in the months ahead. Given the deterioration in trends in the U.K market and Mothercare"s premium rating, Collins Stewart downgraded its recommendation from "BUY" to "HOLD", and reduced its target price from 678p to 550p. Dimension Data Holdings (DDT) shares jumped up by 20.2p to 121.8p after the specialist IT services provider announced that it has agreed on the recommended cash offer made by the telephone company Nippon Telegraph and Telephone. Under the terms of the offer, Dimension shareholders will receive 120 pence for each of its share, valuing the share capital at approximately 2.1 billion pounds. Nippon believes the enlarged group will be well-positioned to "establish a leadership position as a comprehensive ICT services provider that offers significant value to its clients."
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ALTERNATIVE! JKX Oil & Gas (JKX) said test results from its second well in Russia's Koshekhablskoye field far exceeded its expectations. The oil and gas producer reported that Well 20 flowed at stabilised rates of 22.6 million cubic feet per day of gas, and an estimated 25 barrels per day of condensate. The company added that the increased well productivity will "improve both project economics and the level of booked reserves." JKX shares moved up by 3.1p to 291.5p. Small Caps, AIM and PLUS Video search engine Blinkx (BLNX) announced that the telecommunication company Samsung Electronics has selected it for participation in SamsungApps. Under the terms of the agreement, blinkx"s video application, "Beat", will be promoted on Samsung"s new Galaxy S handset. Daniel Stewart views this as a "highly-significant development" for the company, and thereby issued a "BUY" recommendation. The shares increased by 11.75p to 64.5p. IQE (IQE) shares climbed by 2.5p to 21.75p subsequent to the semiconductor wafer supplier announcing that it expects performance to be "significantly ahead of market expectations as a result of strong wireless product sales." In a trading update, the group said it expects to report first-half revenues of at least 32.8 million pounds, EBITDA above 5.3 million pounds and retained profit of more than 2 million pounds. Compared with the first half of 2009, this represents revenue growth of over 50% with EBITDA up over 178%. The outlook for the second half remains positive with the board expecting continued strength in sales volumes. This is expected to be driven by increasing demand for smart phones and high-speed wireless technology. Camco International (CAO) shares dropped by 2p to 15p despite it reporting strong performances across all parts of the business. In a trading update, the emission reduction developer reported "continued expansion of Clean Energy Project Development activities" in the six month period ending June 2010. There was particularly strong demand for consultancy support in the U.K. from both public and private sector clients in the run up to the introduction of the Carbon Reduction Commitment Energy Efficiency Scheme and Feed-in Tariffs. In addition, demand for Camco"s services in Africa has increased with the team winning contracts in South Africa, Uganda and Tanzania to provide a range of services from corporate carbon strategy to clean energy investment assessment. The group expects "continued growth throughout the remainder of the year."
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gain from higher gold prices McKay Securities (MCKS), a real estate investment trust, has completed three office lettings totalling 13,125 square feet at 30/32 Lombard Street, London, with a combined rent of 134,750 pounds per annum. The new tenants are Supinfo University, MMS and People in Computers. These lettings leave the building fully occupied, with future development projects improving in line with the City market, the group said. McKay shares moved down by 1.75p to 130p. Cryptologic (CRP) shares fell by 10p to 155p after the casino software developer announced that it expects revenue to show a "slight decline" in the second quarter, compared to the previous quarter, and that costs will be greater than expected. As a result, the operating loss will be higher and the "company"s outlook for the year is much less encouraging", the firm added. In light of continuing losses, the company has contracted a business consultancy firm to undertake a review of current operations. PLUS-quoted ANS Group* (ANS) announced another year of positive numbers. In its final results for the year ended March 2010, the technology infrastructure specialist reported increased turnover and gross profits by 10% to 13.3 million pounds and 16% to 3.9 million pounds, respectively. Despite this, pre-tax profits fell by 33% to 1 million pounds, as a result of the 500,000 pound investment made, which included two additional directors. The group argues that the use of cash will provide enhanced returns for the business in the coming years. The shares remained unchanged at 122.5p. * Worship Street Investments, which is managed by a corporate client of Rivington Street Holdings, the ultimate owner of this website, owns shares in ANS.
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