From UK-Analyst.com: Friday 16th July 2010

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Deputy Prime Minister Nick Clegg has dismissed claims that last month's emergency Budget will pitch Britain into a double-dip recession. He also said that the U.K. will be a more "liberal nation" in five years time! Meanwhile, China delivered a strong vote of confidence in the euro when Premier Wen Jiabao said that Europe would always be one of the main investment markets for China's foreign exchange reserves. Elsewhere, the cost of living in the US dipped lower in June, as falling energy prices kept inflation in check, but consumer confidence fell to its lowest level in almost a year on fears of a stalling recovery, the labour department figures showed.

At the London close the Dow Jones was down by 200.72 points at 10,158.59 and the Nasdaq was down by 49.38 at 2,199.7.

In London the FTSE 100 was down by 52.44 points to 5,158.85; the FTSE 250 was down by 77.14 points to 9,775.31; the FTSE All-Share was down by 26.06 points at 2,664.54; and the FTSE AIM Index was down by 0.21 points to close at 676.06.

Brokers' Notes

Collins Stewart issued a "HOLD" recommendation for brewer SABMiller (SAB), with a 2,078p target price, ahead of its trading update next week. The broker sees this as a "high quality company" with a very appealing medium-term prospect but remains concerned over the recent "patchy" volume figures. Regarding the financial year first quarter, the World Cup is likely to have helped volume sales, however "pulled-forward" Easter sales are likely to offset this, and, consequently, Collins only expects modest growth. Nonetheless, it believes that investors may be more "enticed" once these figures are eventually released. SABMiller shares climbed down by 2.5p to 1,923p.

Panmure Gordon reiterated its "BUY" recommendation for RPC (RPC), and increased its target price from 310p to 330p, ahead of next week's annual general meeting. The broker believes that the packaging manufacturer is well placed to gain market share, and expects progress through a combination of new product wins and contracts won from weaker players. Panmure added that better than expected full-year results "underlined the momentum of the group's ongoing improvements", despite pressures on volumes through the financial year. With expectations of further progress as a result of reorganisations still to come and initial signs of increasing volumes, the broker believes that the shares are undervalued. The shares moved down by 3p to 260.5p.

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Evolution Securities issued a "BUY" recommendation, and 560p target price, for the food ingredient supplier Tate & Lyle (TATE). Whilst the demand outlook for industrial starches is improving, news of further switching from high-fructose corn syrup to sugar remains a concern. Evolution continues to view the firm as a compelling "turnaround story" with an attractive and robust 5% divided yield. Whilst it welcomes the new CEO Javad Ahmed's strategy to transform the group into a genuine value added food ingredients supplier, it acknowledges that this is likely to be a multi-year project. Tate shares were down by 3.1p to 470.3p.

Westhouse Securities reiterated its "BUY" recommendation for Petro Matad (MATD) and 200p target price. This follows yesterday's announcement that the Davsan Tolgoi-1 well on Block XX in Mongolia has been completed, and has found significant indications of hydrocarbons in the target Tsagaansav formation. The well result confirms that oil has migrated into Block XX in significant quantities, which the firm holds 100% of the licence. "This is clearly a very positive result from the first well in the drilling campaign, and there is a lot more action to come", added the broker. The shares fell by 3.5p to 141p

Blue-Chips

Burberry Group (BRBY) shares climbed up by 9.5p to 800p after the luxury apparel company agreed to acquire the stores and related assets in China, which is currently being operated by its long-standing franchisees. This transaction is in line with the group's strategy of unifying the brand around the world, while at the same time increasing its exposure to retail and to high growth luxury markets. The purchase is approximately 70 million pounds, and is expected to add up to 20 million pounds to the firm's operating profit in the financial year 2011/12. Encouraged by this, Evolution Securities increased its target price from 780p to 830p, and retained its "NEUTRAL" recommendation

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BP (BP.) shares increased by 6.5p to 408.25p subsequent to the oil giant stopping the oil leak in the Gulf of Mexico for the first time since it began in April. Following the installation of the capping stack, the company has commenced a series of pressure tests, which could last up to 48 hours, before it can be certain that the leak has been permanently stopped. Nevertheless, President Barrack Obama immediately warned that a cap sealing off the well might only be a temporary fix, with the final solution relief well still some weeks away. Arbuthnot reiterated its "SELL" recommendation, believing that there remains a "high degree of uncertainty on a great number of factors."

Mid-Caps

Spectris (SXS) shares jumped up 56p to 891.5p following the instrumentation group announcing that it continues to see an improvement in demand, with signs of recovery throughout most markets. As a result, the firm expects sales for the first six months of 2010, on constant currency organic bases, to be 8% higher than the comparable period last year. Adjusted operating profit is expected to be in the region of 50 million pounds, up 5.4% in the same period last year. Assuming current market conditions continue, the group expects to deliver results for the full year ahead of the board's original expectations.

BlueBay Asset Management (BBAY) shares moved up slightly by 0.8p to 295.8, despite the London-based manager of fixed-income funds reporting a fall in assets under management. In a trading update, the firm said funds were down by 7.2% to 34.3 billion dollars (22.4 billion pounds) in the fiscal fourth quarter compared to the previous quarter. The reduction is mainly attributed to adverse exchange rate translation differences resulting from further euro weakening. Still, the company anticipates that full year profit before tax will be 50 million pounds which compares to 17.5 million pounds in the previous year.

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Mothercare (MTC) shares was down by 6p to 524p on news the mother and baby product retailer is in discussions to acquire a 25% stake in Headline - the group which operates the Mothercare and Early Learning Centre franchises in Australia and New Zealand. The investment will be made by way of convertible loan notes with a value of 12.2 million Australian dollars (7.2 million pounds). The capital will provide Headline with increased resources to accelerate the nationwide expansion.

Stobart Biomass Products, a joint-venture between Stobart Group (STOB) and Mr. A.W. Jenkinson, has acquired certain parts of the business and assets of Amenity Horticultural Services, a U.K. manufacturer of woodchip biomass fuel. Commenting on this, Stobart CEO, Andrew Tinkler, said that the acquisition, which is for 2 million pounds, provides the firm with a "leading position in a new market." Arbuthnot does not expect this to have a material impact on its estimates, and thereby reiterated its "NEUTRAL" recommendation, with a target price of 150p. The shares edged back by 0.7p to 150.3p.

Small Caps, AIM and PLUS

International venture management firm Angle (AGL) has made strong progress with NeuroTargets, its 25% portfolio company specialising in the relief of neuropathic pain. The firm said that, following the success of the first phase work, the Welcome Trust has agreed a second phase funding of a further 3.8 million pounds for the research project at the University of Bristol, bringing the total funding to 4.3 million pounds. The second phase funding is intended to complete the pre-clinical work for the neuropathic pain relief drug to allow it to enter human trials. The shares climbed up by 1.5p to 25.75p.

PayPoint (PAY) shares rocketed up by 80.5p to 344p on the announcement that the National Lottery Commission has rejected a plan by lottery operator Camelot to offer ancillary activities, including mobile top ups and bill payments, though its terminals. The cash and internet payments company commented that "the proposal would have distorted competition in the bill payments sector."

Vernalis (VER) shares moved down by 2.75p to 32.5p after the pharmaceutical company reported it has discontinued development of vipadenant as a treatment for Parkinson's disease. The company also said that it will continue its novel A2A receptor antagonist programme - a programme aimed at restoring the motor imbalance caused by Parkinson's disease - with a next generation Vernalis compound. The company expects to progress the compound into phase 1 clinical studies in early 2011.

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Sinclair Pharma (SPH) shares rose by 1.75p to 28.75p as the pharmaceutical specialist posted strong performances across the group. In a trading update, the firm reported increased full year revenues, excluding licensing income, by 13% to 26 million pounds in 2010, compared to 2009. Its Italian operation performed particularly strongly with like-for-like revenue growth of 23%. Following restructuring, the manufacturing facility at Clory for the first time produced over 3 million units in the second half. Commenting on the performance, Chris Spooner, CEO of Sinclair, said that he "firmly" believes the group's strategy is "beginning to deliver."

Record (REC) shares flopped by 2.75p to 48p after the specialist currency manager announced a fall in assets under aanagement by 12% to 19.7 billion pounds compared to the previous quarter. The factors, other than client flows, which impacted this figure include exchange rate movements, movements in global stock & other markets, and pooled fund investment performance. As at 30th June the group had 76 clients, down 18% compared to the previous period. Commenting on this, the group said that, in the short term, it is focussing its marketing and sales effort on promoting its Dynamic Hedging product, and believes that there should be further client additions in the current financial year.

Shares in SDI Group (SDIG) pushed up by 0.25p to 2.25p as the warehouse support firm agrees a takeover offer from FSU investments. The offer values the existing issued share capital at approximately 2.8 million pounds, and will be funded using FSU's own cash. This follows the recently announced losses the company made, in which the board believes will be best tackled by accepting the offer. In the preliminary results, the group reported a loss before tax, post-exceptional items, of 19 million pounds for the year ended 31st March 2010, compared with a loss of 2 million pounds in the previous year.

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The Week Ahead

We expect a busy week on the news flow from blue-chips next week. Pharmaceutical firm GlaxoSmithKline (GSK) and support services company Capita (CPI) are due to update the market , with water operator United Utilities (UU.) and communication services provider Vodafone (VOD) both due to release interim management statements on Friday. Investors will be looking for a positive update from brewer SABMiller (SAB) on Thursday, shares in which have been volatile over the last few months as a result of uncertain economic conditions.

Amongst the retailers Findel (FDL) will be announcing finals on Tuesday, with disappointing results expected. Investors will also be looking at how the steps to cut government borrowing will hit consumer demand at home improvement group Kingfisher (KGF). Another retailer reporting next week is Sports Direct International (SPD), shares in which are back up after a temporary decline in June following the announcement that VAT will rise to 20%.

Financial investors will next week receive interim results from International Personal Finance (IPF) and a trading update from Close Brothers Group (CBG), both of which will be looking to emulate rival JP Morgan, which recently posted a rise in net income by 75% to 3.1 billion pounds in the same period last year.

Amongst the small caps we look forward to strong numbers from media group Ebiquity (EBQ) on Friday and an indication of how the real estate investment sector is performing as West Pioneer Properties (WPR) reports on Wednesday.

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