Monday's Stock Market Report from UK-Analyst: featuring BP, Unilever and Tomkins
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From UK-Analyst.com: Monday 19th July 2010 Free Seminar on investing in Europe Join FT columnist David Stevenson on the 22nd July as he discusses why he feels Europe and especially Euroland could be looking good value compared to its peers, and he evaluates the risk of investing in Europe. The event will be held from 5.30pm until 7.30pm on Thursday 22nd July 2010 at the RBS offices in Liverpool Street. Register for free here. Markets absorbed fresh sovereign debt fears in Europe, with Ireland and Hungary in the spotlight. Moody's downgraded Ireland's credit rating, pointing to the government's "gradual but significant loss of financial strength". Meanwhile, the International Monetary Fund (IMF) and the European Union pulled the plug on a 20 billion euro financing deal for Hungary on concerns about the newly-elected Hungarian government’s budget plans. Investors also had to contend with further concern surrounding BP's containment effort in the Gulf of Mexico, whilst pessimism was tempered by a raft of M&A news. At the London close the Dow Jones was up 10.29 points at 10,108.19 and the Nasdaq was 2.21 points ahead at 2,181.26. In London the FTSE 100 dipped 7.01 points to 5,151.84; the FTSE 250 eased back 39.79 points to 9,735.52; the FTSE All-Share fell 3.53 points to 2,661.01; and the FTSE AIM Index dropped 5.04 points to 671.69. Brokers' Notes Shore Capital took a bullish view on Reckitt Benckiser (RB.) ahead of the detergent maker's first half results, due on 26th July. The broker increased its full year expectations to reflect a more positive impact from currency, most notably in Developing Markets but also in North America and Australia, coupled with the ongoing absence of generic competition for Suboxone. Shore raised its 2010 profit forecast by 7% to 2061 million pounds, taking its EPS estimate to 212.4p, which is modestly above consensus EPS of 210.9p. "Despite challenging trading conditions in Europe and the ongoing uncertainty surrounding Suboxone, we believe such multiples represent an attractive entry point to a stock with Reckitt’s well established track record of delivering industry leading sales volume growth, operationally driven margin progression, cash generation and returns, supported by ongoing corporate potential in emerging markets and consumer healthcare, and we reiterate our BUY recommendation." Reckitt shares slipped 5p to 3,243p. Panmure Gordon reiterated its 'buy' stance for Land Securities (LAND) ahead of a 'busy week' for the REIT. The broker believes the central London office market remains one of the most attractive market segments for rental growth opportunities - "Land Securities has significant exposure here and looks well placed to benefit from rising rents in our view." It added that the "company’s shares look good value in our view, trading on a 0.77x PNAV multiple and offering a 4.9% dividend yield based on respective March 2011 forecasts. We remain buyers with a target price of 656p." Land Securities finished 4.5p firmer at 577.5p.
Have you been offered the chance to buy Ocado
shares? Brewin Dolphin initiated coverage of outsourcing provider Communisis (CMS) with a 'buy' stance and a 32p price target. The broker believes the business has made huge strategic progress despite the challenging recent macro economic backdrop and now has the building blocks in place to deliver significant growth in profitability through "a combination of top line growth in higher margin Intelligence Driven Communication activities, improving margins in printing by focusing on higher value added personalised communications, and through recovery in volumes in the Group’s traditional activities that have suffered during the recession." Brewin added that it reckons a share price of 100p+ could be achievable if management delivers on its growth and margin targets. Communisis shares advanced 0.5p to 23.5p. Evolution downgraded its stance for Associated British Foods (ABF) to 'neutral' from 'buy', advising clients to 'lock in gains' following a 30% rise relative to the FTSE 100 since December and a concomitant 13% increase to earnings estimates. "Although we remain long term bulls, we think this is an opportune moment to bank profits," argued the broker. Evo argued that the most recent IMS was more mixed than the four previous updates while it sees limited upside to 2011 earnings. "We also see Primark gross margin pressures beginning to build," it added. ABF shares slipped 27p to 1,029p. Blue-Chips Shares in International Power (IPR) generated plenty of interest today, moving 33.4p higher to 350.2p after it revealed it was in preliminary talks with GDF Suez over a possible combination of assets in the UK and Turkey. This would create an enlarged International Power which would be listed on London Stock Exchange's main market. International Power's board said it believed that the possible combination warranted consideration given the strategic rationale and potential for synergies. Broker Evolution said it sees the strategic benefits as limited to vertical integration in the US (where it would have preferred to see IPR sell its assets), and in the Middle East where IPR has been unsuccessful in the last two years in gaining new projects. "Until we get the terms of the deal it is not possible to comment on the attractiveness of a merger and maintain Add." Unilever (ULVR) offloaded its Italian frozen foods business, Findus, to a company in which Birds Eye Iglo has a significant stake for 805 million euros. The transaction includes leading brands 4 Salti in Padella, Sofficini, Capitan Findus and That's Amore. As part of the agreement, approximately 650 factory and head office employees will transfer. Sales of Findus Italy were 462 million euros in 2009. Unilever shares rose 11p to 1,893p. Markets Move Fast. Keep up with GFT's Free Guide. Learn to Harness Market Volatility.
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means) Click here to download your Guide. Shares in BP (BP.) slipped 18.7p to 388.45p on fresh leak concerns following reports from a US official on Sunday that a possible methane or oil seep had been detected. Coast Guard Thad Allen issued responded in a letter to BP: "I direct you to provide me a written procedure for opening the choke valve as quickly as possible without damaging the well should hydrocarbon seepage near the well head be confirmed." When asked about the official's comments, a BP spokesman would only say that "we continue to work very closely with all government scientists on this". BP's chief operating officer, Doug Suttles, said at the weekend that "No one associated with this whole activity ... wants to see any more oil flow into the Gulf of Mexico. Right now we don't have a target to return the well to flow." Rolls-Royce (RR.) bagged 750 million dollars' worth of orders today, helping lift its shares 0.5p to 580p. The biggest was with Russia's national airline, Aeroflot, which has ordered 24 Trent 700 engines from Rolls-Royce. The order value is 650 million dollars at list prices and includes a long term service agreement. The other award was from Yemen Airways for V2500 engines to power 10 Airbus A320 aircraft and is valued at 100 million dollars. The order also includes a long-term service agreement and aircraft deliveries are scheduled to begin in 2011. Mid-Caps Shares in engineer Tomkins (TOMK) soared 63.9p to 294.2p on the back of a bid approach from a consortium comprising of the Onex Corporation and the Canadian Pension Plan Investment Board. The offer is worth 325p per share in cash and due diligence is said to be at "an advanced stage". Meanwhile, the Group said its performance continued to improve throughout the remainder of the first half of 2010. Sales volumes increased by about 23% year-on year, driven by restocking and strengthening demand. However, Tomkins said that it anticipates that sales and margin performance in the second half will not be as strong as the first half of 2010.
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Report! Click here and find out how VectorVest values companies in your portfolio. Meanwhile, fellow engineer Fenner (FENR) said third quarter revenue and underlying operating profit were well ahead of the comparable period last year. It added that trading in the advanced engineered products division has exceeded expectations, with growth from the underlying recovery in industrial markets, particularly the US, supplemented by a re-stocking of supply chains in certain operations. Furthermore, the conveyor belting division, which was largely unaffected by the economic downturn, has continued to perform well. Broker Collins Stewart commented that "the Group is well placed to make further bolt-on acquisitions across both divisions", and reiterated its 'buy' stance. Fenner shares rose 10.2p to 226p. Small Caps, AIM and PLUS Shares in Clean Air Power (CAP) tumbled 2p to 14.5p after the green technology provider said that delays in the sale of its Dual-Fuel units will cause revenues for the current year to be below market forecasts. Specifically, the delay of a new gas facility in Tasmania has resulted in a backlog in the delivery of units into the Australian market. On a more upbeat note the firm also announced the signing of a five year deal with Volvo Powertrain for the supply of its Dual-Fuel technology into truck engines, along with a development agreement with Volvo Bus Corporation worth 160,000 pounds. Also falling, by 1.75p to 11p, was Max Petroleum (MXP) after the Kazakhstan based oiler said that the Ministry of Oil and Gas had terminated its licence for the Astrakhanskiy Block. This is due to Max's failure to comply with the work obligations stipulated under the licence. The letter does not affect Max’s principal asset, the Blocks A&E licence area. The company added that it does not believe the Ministry's action will have any material adverse affect on its liquidity, financial condition or prospects.
Do you have any gold exposure in your
portfolio? Another small cap dog of the day was chilled food business Uniq (UNIQ). The shares plunged 5p to 10.5p as the firm said that it has received feedback from the Pensions Regulator saying that the company's Pension Framework, as currently constituted, does not meet all of its criteria for clearance. Uniq, which had a deficit of 436 million pounds as at March 2009, said that "The Company and the Trustee continue to work together to seek a resolution for the Pension Scheme and the Company anticipates it will take some time to resolve." The firm is due to report interim results later this week. Shares in agriculture group Carr's Milling Industries (CRM) gained 30p to 520p after it announced that due to a strong third quarter full year profits will be well ahead of the previous year. Driving the results was a strong performance from the Agriculture division, where sales of animal feed and fuel oils benefitted from the prolonged cold winter. This offset negative impact on margins from weaker consumer demand and continuing over-capacity in the Food division and delays in orders in the Engineering business. Carr's added that as at 29th May 2010, net debt was 18.5 million pounds, down 5.4 million pounds from a year earlier. TyraTech (TYR) added 1.5p to reach 14.5p on news that the US based pesticide firm has plans to remove certain trading restrictions from its AIM listed shares. The company will creating a second line of shares to enable them to trade and settle electronically via the CREST system. The firm believes this will make the shares more attractive to investors and improve liquidity. Tyratech, which develops insecticide and parasiticide products, last month reported product revenues up from 1 million dollars to 2.9 million dollars in the year to 31st December 2009, with losses down from 17.4 million to 13.9 million. In a trading update UK Coal (UKC) said that it expects a total pre-tax loss of 94 million pounds for the first half of 2010. This was despite the firm seeing average realised prices rising by 9%. During the period the Doncaster based firm saw production fall by 1 million tonnes to 2.7 million tonnes as a result of delays at the Daw Mill mine, the closure of the Wellbeck mine and due to a lower performance from the Kellingley and Thoresby mines. Net debt excluding restricted cash and generator loans/prepayments at 26 June 2010 is expected to be around 170 million pounds. UK Coal added that it is in advanced negotiations regarding the sale of the Blair Housesurface mine site in Fife. The shares crumbled by 5.25p to 32.75p.
ROBINIA INVEST - YOUR PROFITABLE AND ETHICAL
ALTERNATIVE! E-learning business ILX Group* (ILX) saw its shares rise by 2p to 23.5p after it reported that revenues and profits in the three months to June 2010 were substantially ahead of last year. This was driven by the newly formed International Division, which generated revenue growth of 60% in the quarter. Elsewhere, there was 10% revenue growth and improved margins in the Best Practice division, with the Finance Training division benefitting from a reduced fixed cost base and new e-learning contracts. CML Microsystems' (CML) shares advanced by 7p to 92.5p as the semiconductor manufacturer said the results for the first quarter of the financial year were "materially ahead of internal expectations." This comes as markets continue to improve, especially in the Americas and Far East, which are growing faster than those in Europe. CML added that the improved trading, along with stable margins and good cost control, has helped it to reduce net debt levels and fund working capital. Broker Cenkos, which has a "buy" stance on the shares, raised its profits forecast for the year from 1.1 million pounds to 2 million pounds on the back of the news. * The company is a corporate client of Rivington Street Holdings, the ultimate owner of this website; the T1ps Smaller Companies Growth Fund owns shares in ILX.
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