Tuesday's Stock Market Report from UK-Analyst: featuring Ocado, Barclays and Enterprise Inn
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From UK-Analyst.com: Tuesday 20th 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. The “risk-off” trade has clunked into gear as investors were disappointed by U.S. earnings and once again spooked by the fallout from European fiscal difficulties. The trigger in Europe for the latest slide appeared to be news highlighting how the stretched budgets of many of the continent’s nations, and the austerity drives designed to combat them, will place strains on financial systems and negatively affect the corporate sector. Meanwhile, concerns linger about the health of the U.S. household-focused sector and whether that may debilitate the broader global recovery. Indeed, such is the worry about the US economy slipping backwards, that some analysts see the Federal Reserve needling to consider further monetary stimuli, the Financial Times reported. At the London close the Dow Jones was down by 75.45 points at 10,078.98 and the Nasdaq was down by 18.99 at 2,179.24. In London the FTSE 100 fell by 8.82 points to 5,139.46; the FTSE 250 dropped 35.16 points to 9,691.32; the FTSE All-Share slipped 5.35 points at 2,652.7; and the FTSE AIM Index closed down by 2.85 points at 669.24. Brokers' Notes GE&CR issued a "BUY" recommendation for Red Rock Resources* (RRR), with a 6.1p target price. The mining company has a supportive shareholder base which, along with careful financial management, has allowed the company to remain debt free. The research house used its sum of the parts valuation to generate the target price, but, nevertheless, believes that there are "major" upsides to this. This could come from any number of factors, such as: increasing gold output at the El Limon mine in Columbia; a larger and upgraded resource at the Migori gold project in Kenya; and increased share values for each of the other investments. Additionally, Red Rock's current share price is backed by the market value of its stake in Jupitor Mines alone, so, in essence, the remaining portfolio is a bonus, bringing about further upside. The shares edged forward by 0.12p to 2.2p. Panmure Gordon reiterated its "BUY" recommendation for GlaxoSmithKline (GSK) and 1,400p target price, ahead of the pharmaceutical company's second quarter results tomorrow. The broker expects this to be a difficult quarter for the firm, with forecasted nominal earnings per share declining 9% to 28.2p. On the back of legal charges pre-announced last week totalling 1,570 million pounds, equivalent to 26.5p per share, the group will be barely profitable this quarter at 1.7p per share. Nevertheless, Panmure believes that the company is in a strong position to focus on growth as it strengthens its position in the emerging markets. Furthermore, it has strong pipeline of products, led by Benlysta for lupus, which could reach the market in 2010 and provide a significant source of upside. GlaxoSmithKline shares dropped by 13.5p to 1,174.5p.
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t1ps.com Collins Stewart reiterated its "BUY" recommendation for Debenhams (DEB), with a 90p target price, after the department store owner completed its refinancing. As a result, the firm’s cost of debt has been reduced from 7% to 4.5% in the first full year of the new facilities. The group is trading at a discount to the sector, which Collins does not believe to be justified, considering the company's fading balance sheet concerns and strong operational cash conversation. The broker added that, even though there are risks to like-for-like growth when a hike in VAT takes place, "Debenhams has the opportunity to drive the retail gross margin...and to unlock profit in the recently acquired Magasin stores." The shares advanced by 1p to 58.35p. Evolution Securities retained its "BUY" recommendation for Experian (EXPN), with a 767p target price. The broker believes that the information and customer relationship management services provider deserves a re-rating after it delivered the highest level of organic revenue growth for three years in the first quarter of the 2011 financial year. It doubled the previous quarter's growth to 6%, attributable to the success of the North America region, which represents 53% of total sales. Evolution expects fully diluted earnings per share growth of 6% year-on-year (like-for-like adjusting for the disposal of FARES) to 65.7 cents (43 pence) for the 2011 financial year and believes that the target price implies 20% upside. Experian shares declined by 11.5p to 637p. Blue-Chips Severn Trent (SVT) shares dropped by 11p to 1,265p as the water company confirmed that "trading across the group has been in line with its expectations and prior guidance." No new material trading events or transactions have occurred during the period 1st Aril to 19th July 2010, the company added. Consumption across the measured income base, principally non-household customers, has remained relatively stable year on year in the period. Even though the changes to the U.K. corporation tax and capital allowance regime announced in the budget will not impact the current financial year, the group is reviewing the impact on future years. 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. Cable & Wireless WW (CW.) shares fell by 14.5p to 69.05p as the telecommunication company announced that non-contracted spending in the U.K. public sector has slowed "very significantly." This follows the new Government's emergency budget in late June. Given the nature of the firm's public sector business, this reduction will adversely impact trading in the current year. In light of the downturn, the firm have stepped up its cost reduction initiatives and now expect total operating expenditures to reduce year-on-year. Expecting the market to drive the shares lower, Collins Stewart downgraded its recommendation to "HOLD", with a 100p target price. Barclays (BARC) shares moved back slightly by 0.05p to 285.25p as its subsidiary, TAV, agreed to acquire Tricorona for 1,130 million Swedish Kronas (98 million pounds). The acquisition is expected to build the firm's reputation in the carbon markets. Tricorona's business is focused on environmentally related market instruments, mainly though investments in, and the trading of, project-linked instruments known as Certified Emission Reductions (CERs), within the framework of the Kyoto Protocol. Mid-Caps British online grocer Ocado has cut the price at which it expects to sell shares in its initial public offering just hours before orders were due to close. The online grocer, which hasn't made an annual operating profit in its 10-year existence, is now offering investors shares at between 180 pence and 200 pence, down from an initial range of between 200 pence and 275 pence that valued the company at between 0.8 billion pounds and 1.1 billion pounds. This comes after the firm had earmarked around 15% of stock for retail investors, aimed at raising 50 million pounds, of which just 3% of investors exercised to invest. Aquarius Platinum (AQP) shares moved up by 27.5p to 254.6p subsequent to receiving reassurance that the platinum producer will have some flexibility on how to improve safety at its mines. South Africa last week issued a directive restricting how much ore can be extracted by some mechanised mining techniques after an accident killed five miners at an Aquarius mine this month. Following a meeting with officials from the Department of Mineral Resources (DMR), the firm is reviewing mine design and support parameters to present best practice guidelines to the DMR in respect of each of its mines individually. Seymour Pierce said that, while the company has much work to do, it reiterated its "OUTPERFORM" recommendation.
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Report! Click here and find out how VectorVest values companies in your portfolio. Enterprise Inns (ETI) has continued to see an improving trend in trading performance as the pub operator expects to deliver results for the full year in line with its expectations. The trend of stabilisation in the estate has continued and, with the help of reasonable weather and the FIFA World Cup, average income per pub during the third quarter was in line with that achieved in the same period last year. On a year-to-date bases, average income per pub for the entire estate is down by 2% on last year. Panmure Gordon does not expect any material change to consensus expectations, and thereby retained its "HOLD" recommendation and 90p target price. The shares advanced by 4p to 98p. IG Group (IGG) shares dropped by 21.8p to 444.8p despite the financial spread betting group reporting a marked improvement in sales. In its preliminary results, the group reported increased revenue by 16% to 298.6 million pounds for the year ended 31sy May 2010. Adjusted profit before tax leapt by 25% to 157.6 million pounds and year-on-year partners business revenue powered ahead by 42% to 48.7 million pounds. A final dividend of 13.5p per share will be paid, making a total distribution for 2010 of 18.5 per share, an increase of 23% on 2009. Commenting on the performance, Jonathan Davie, Chairman of IG, said the firm's aim is for many of its newer regional markets to reach the scale and performance to that achieved in the UK and Australia. Impressed by these results, Collins Stewart reiterated its "BUY" recommendation and 500p target price. The question which the broker poses is "what will IG's management do with the surplus cash?" Small Caps, AIM and PLUS Synchronica (SYNC) shares edged back by 0.17p to 1.58p despite the British mobile email software developer agreeing to buy Canadian peer iseemedia for 5.3 million pounds. The acquisition will extend Synchronica's contracted addressable market of 40 mobile operators by a further 193 million from four contracts with large operators in India and South-East Asia, resulting in a total addressable market of 853 million subscribers. Additionally, it is intended to help the company to achieving its goal of market leadership in next-generation mobile messaging for emerging markets Findel (FDL) shares declined by 6.82p to 9.93p subsequent to the home shopping group announcing widened losses in a "challenging period." The firm reported that sales, from continuing operations, declined by 4% to 547 million pounds. The statutory result for the period to 2nd April 2010 was a loss before tax of 76.1 million pounds, up 33% from 2009. These results reflect the challenging environment faced by its consumer credit business and the week performance of its Education Supplied division where sales reduced by 15%. Consequently, the company will not pay dividends for the 2010 fiscal year as it expects higher interest charges to impact the business. Following the update, Seymour Pierce has reduced its pre-tax profits and earnings per share forecasts for the 2011 financial year, and, consequently, reiterated its "SELL" recommendation.
NAV at launch on September 4 2009 100p Abbeycrest (ACR) shares moved back by 1.25p to 5p after the jewellery designer and manufacturer breached its profit covenants with its senior lender, Burdale Financial. This comes from operating in "challenging conditions", the company said, as both its Essentials and Brands divisions remain exposed to the rising gold price. It is now in discussion with Burdale to reset these covenants and is also in negotiations to increase the level of and improve access to the existing facilities with its finance partner in Thailand, Siam Commercial Bank. Despite this, the board re-confirmed its believe that the group is now much better positioned. Superglass (SPGH), the glass fibre insulation products manufacturer, has seen like-for-like sales from the Carbon Emissions Reduction Target (CERT) programme - the largest source of sales for Superglass products - decline by 40% in the second half of the financial year. This comes after the government failed to clarify the extension of the programme. Separately, the firm has reported that progress on repairs, on the failure of their furnace at the Stirling plant, has been faster than initial estimates and expects it to be fully operational by the end of August. Holding the view that the "potential for earnings recovery is significant when CERT and other end markets improve", Brewin Dolphin reiterated its "BUY" recommendation, with an increased target price from 33p to 42p. Superglass shares fell by 3p to 20p.
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ALTERNATIVE! South African ferrochrome producer International Ferro Metals (IFL) expects to achieve full capacity later this year after a fourth quarter dip. The shares edged forward by 0.25p to 27.25p. In a production report, the group posted a 6% fall in output to 51,331 tonnes in its fiscal fourth quarter to end June compared with the third, but said production had improved in the current quarter. Full-year output was 200, 440 tonnes, nearly double from last year when the sector made sweeping cuts to production after demand and prices tumbled during the global downturn. According to the independent authority CRU, stainless steel demand is expected to strengthen over the next quarter with a corresponding increase in ferrochrome demand. PLUS-quoted company Titania Investments* (TITP) shares remained unchanged at 0.075p as the investment company improved on its huge loss made last year. In a financial statement, the firm reported a loss of 412,995 pounds for the year ended 31st January 2010, down from 1,238,868 pounds in 2009, as it cut down on its administrative expenses. The board is currently undertaking initiatives to strengthen its balance sheet and as such will continue to survive on a limited "care and maintenance basis." In addition, it is also in the process of reviewing the future strategy of the company. * The company is a corporate client of Rivington Street Holdings, the ultimate owner of this website.
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