From UK-Analyst.com: Wednesday 21st July 2010

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The Bank of England’s monetary policy committee discussed restarting quantitative easing earlier this month, as signs of weaker growth emerged and in the light of the impact of the emergency Budget, minutes from its last meeting reveal. The committee was split for the second month in a row at its meeting, with seven of the committee’s eight members voting for no change in policy. Meanwhile, the Swiss National Bank revealed the cost of its massive foreign exchange interventions to restrain the value of the franc, with losses of more than 14 billion Swiss francs (8.7 billion pounds) in the first half of this year. At the London close the Dow Jones was down by 10.97 points at 10,218.99 and the Nasdaq was down by 12.58 points at 2,209.91.

In London the FTSE 100 climbed 75.18 points to 5,214.64; the FTSE 250 jumped 154.98 points to 9,846.30; the FTSE All-Share rallied 38.75 points to 2,691.45; and the FTSE AIM Index rose 4.38 points to 674.01.

Brokers' Notes

Collins Stewart reiterated its "BUY" recommendation for the direct home shopping retailer N Brown (BWNG), with a 300p target price. The broker believes that while VAT hikes is likely to have an impact on consumer demand as a whole, the lack of alternatives in the market for say its supersized clothing brand, Simply Be, should provide some resilience to the group. It also believes that the cross-selling initiatives targeting 40 million pounds of revenue could be increased through cross marketing, brand development and improved "size and fit." Furthermore, the firm launched Simply Be in the US at the start of July, with the marketing effort due to start in late August. Its ability to pursue low risk, low cost expansion, Collins says, "is a key competitive advantage as a direct-to-home retailer." Brown shares pushed 0.9p ahead to 239.4p.

Arbuthnot reiterated its "BUY" recommendation for Ryanair (RYA), with a target price of 475p. Current trading in the European airline industry appears strong, with demand rebounding faster than expected and capacity growth across the industry more restrained than might normally be expected at this stage of the cycle. The latter should remain a feature for the foreseeable future with weaker airlines (but certainly not Ryanair) struggling to secure finance given current tight credit conditions in both the aircraft leasing market and the wider banking industry. Despite management's caution on the winter outlook, Arbuthnot believes the balance of risks to estimates is on the upside, especially with fuel being 90% hedged for this financial year. Ryanair shares flew up by 10 euro cents to 393 cents.

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Seymour Pierce issued a "BUY" recommendation for the inkjet printing developer Xaar (XAR), with a raised target price from 100p to 155p. Following yesterday's trading update, the broker commented that, even though the stabilisation of Platform 1 is reassuring, revenue growth is being driven by Platform 3. Seymour goes on to say that the firm is "capacity constrained" with regard to this product, and as a result it has edged up its revenues forecasts. Management's increasingly positive tone suggests to the broker that it can once again start to look at the group as a medium term growth story. Xaar shares rose 0.5p to 126.5p.

Panmure Gordon downgraded its recommendation for De la Rue (DLAR) from "HOLD" to "SELL", with a lowered target price from 983p to 661p. This comes after the security printer and papermaker issued a profit warning following production problems at the banknote paper operation. Production and shipment has been suspended as what appears to be one particular shipment of banknote paper ordered by a state printing works client failing to meet certain quality specifications. While the full financial impact remains unclear, the reputational damage and knock-on effects of this should not be underestimated, Panmure said. The shares fell a further 24.5p to 752p.

Blue-Chips

BP (BP.) shares climbed 12.25p to 399.7p after the oil giant entered into several agreements to sell upstream assets in the U.S, Canada and Egypt to Apache Corporation. The deals, together worth a total of 7 billion dollars (4.6 billion pounds), comprise BP's Permian Basin assets in Texas and south-east New Mexico, US; its Western Canadian upstream gas assets; and the Western Desert business concessions and East Badr El-din exploration concession in Egypt. The proceeds of the sales will be used to increase the cash available necessary to meet the obligations likely to arise from the Gulf of Mexico oil spill. Encouraged by the "positive deal", Westhouse Securities retained its "BUY" recommendation.

British Airways (BAY) and its partners Iberia and American Airlines have received the regulatory green light to operate a joint business on transatlantic flights. Following European Union approval, the company has now been granted anti-trust immunity from the U.S. Department of Transportation. The airlines plan to launch the transatlantic joint business this autumn and will co-operate commercially on flights between the EU, Switzerland and Norway and the US, Canada and Mexico. Commenting on this, the British Airliner said that by working together, the airlines will expand customer choice by supporting routes that would not be economically viable for a single airline. British Airways shares flew up by 10.2p landing at 209.6p.

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Cobham (COB) shares shot up by 3p to 236.2p after the British defence contractor received further contract releases from Northrop Grumman for the ongoing supply of its ROVIS digital vehicular intercom systems. The deal is valued at 26 million dollars (17 million pounds). The intercom system provides enhanced communication and situational awareness to users of wheeled and tracked military vehicles. Commenting on this, the group said that the demand for its digital vehicle intercom systems continues to grow, with more than 140,000 systems already fielded with 22 armies around the world.

Mid-Caps

Shares in British online grocer Ocado (OCDO) tumbled on its London debut from the issue price of 180p to 165.75p. The fall came on top of an eleventh hour cut in the initial public offering, leaving initial valuations of the chain looking massively over-ambitious. Yesterday, the online grocer, who hasn't made an annual operating profit in its 10-year existence, lowered the range for its flotation price to 180-200 pence from an initial 200-275 pence. Tim Steiner, CEO of Ocado, said that some potential investors had been put off by a “rear view mirror” view of the company’s historical performance, rather that its future prospects.

SSL International (SSL) shares soared 297p to 1,179p subsequent to the consumer products company being sold to Reckitt Benckisder for 2.5 billion pounds. Under the terms of the offer, the firm will receive 1,163 pence per share and will also receive the proposed final dividend of 8p per share. Separately, in a statement relating to the period from 1st April 2010 to date, the company also announced a "satisfactory" performance with both Durex and Scholl continuing to perform well. It reported that the net debt of 41.1 million pounds, as at 31st March 2010, has been hit following a series of acquisitions.

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Galiform (GFRM) shares rose 2.75p to 66.5p on the back of a four-fold increase in profit, boosted by new depot openings and better margins. The owner of Howden Joinery, which supplies kitchen units, said it made an underlying pre-tax profit of 21.6 million pounds in the 24 weeks to 12th June 2010, up from 4.7 million pounds in the year-earlier period. Revenue increased 2.5% to 324.7 million pounds, with sales at Howden depots open over a year also up 2.5% at 319.2 million pounds, and gross margins up 4 percentage points to 58.1%. The company has opened 16 new depots so far in 2010, which is line with its plan to open 20 to 30 over the year. "With a resilient operating model and attractive valuation", Panmure Gordon reiterated its "BUY" recommendation and 85p target price.

Euromoney Publications (ERM) shares slipped 9.5p to 579p as trading at the business-to-business media group continues in line with the board's expectations. Total revenues increased by 16% to 97.9 million pounds in the quarter to 30th June 2010, driven by a good performance from the group's event businesses and a continued recovery in advertising revenues. Net debt was 155.4 million pounds, a reduction of 22.7 million pounds since 31st March, largely reflecting the company's strong operating cash flows in the period. The firm added that the "growing market uncertainty" remains and there are signs of slowing rate of sales growth in advertising and delegates. Collins Stewart thinks the group continues to look attractive, given its heavy emerging markets exposure, and thereby issued a "BUY" recommendation and 660p target price.

Small Caps, AIM and PLUS

Data centre provider CSF Group (CSFG) reported a year of "notable success", with growth in both revenues and profits as the recurring data centre rental revenue strengthened. The group's revenue grew by 15% to 13 million pounds in 2010, compared to the previous year, and profit before tax increased from 0.1 million pounds to 9 million pounds. This was mainly due to the gain on sale and leaseback of the CX2 data centre of 7.7 million pounds. The firm's data centre business posted a 133% increase in rental revenue to 6.5 million pounds in 2010 as a result of the commissioning of the CX2 data centre in 2009. Commenting on the performance, CSF chairman, Dato' Ting Heng Peng said, "the group has made good progress in positioning itself to capitalise on future business opportunities." Shares in the firm rose 0.5p to 57.5p.

Seeing Machines (SEE) shares jumped 0.5p to 3.625p after the vision based industrial systems developer was awarded two contracts to install the DSS driver monitoring equipment - an active system that directly monitors the driver of a vehicle for distraction and fatigue events. The contracts provide for the DSS to be installed into 45 haul trucks at two North American open-pit mines. The company expects to announce further deals in the near future. Encouraged by this, Daniel Stewart issued a "BUY" recommendation, with a 6.8p target price.

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Dominion Petroleum (DPL) shares slumped 2.33p to 3.3p on news its Ngaji-1 well on the Ugandan side of the Lake Edward basin yielded “no significant hydrocarbons.” The well was drilled to a total depth of 1,765 metres. In addition, the well may be suspended to provide for possible deviated drilling under Lake Edward. The company added that the result would not deter additional planned exploration activities in the area.

Scottish retinal-imaging technology firm Optos (OPTS) posted slightly lower revenue, hurt by a drop in the number of installed eye-testing devices. The company, which sells eye-testing instruments that can warn of high blood pressure and some cancers, posted revenue of 24.2 million dollars (15.8 million pounds) for the third quarter to end-June, down 0.8% compared with a year ago. Although pay-per-patient revenue fell 5.5% to 22.2 million dollars (14.5 million pounds) in the third quarter, Optos' revenue from capital sales and service contracts more than doubled to 2 million dollars (1.3 million pounds). Commenting on this, the firm said that it is working to further expand its customer base, particularly by targeting growth in Europe and new geographic markets, entering the ophthalmology field.  Brewin Dolphin commented that, looking forward, "the move to higher end medical markets and potential licensing/distribution deals to leverage off the sales infrastructure should prove beneficial." Optos shares slipped 4.5p to 101.5p.

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Energy Technique (ETQ) shares tumbled 1.5p to 6.25p after the air conditioning company announced a 50% decline in the number of new commercial property construction projects, resulting in much reduced demand for the group's products and services. Sales fell by 16% to 6.54 million pounds in the year ended 31st March 2010, with a corresponding reduction in profit before tax of 15,000 pounds, down from 255,000 pounds in 2009. Moreover, the post acquisition integration of SIAS FM, the new maintenance business acquired in August 2009, is complete and the business made a contribution to firm's operating profits. Commenting on future prospects, the company expects a continuation of “very challenging trading condition for the remainder of the current financial year.”

PLUS quoted company dotDigital (DOTP) announced that it expects to report on a period of continuing growth in sales and profitability driven, particularly, by its email marketing business, dotMailer. The digital marketing agency reported that its customer numbers have increased by 53% to 3,500 in June 2010 compared to a year earlier and, excluding the acquisition of Netcallidus, revenues have increased by over 35%. Commenting on this, the firm said that its merged SEO operations (dotSEO and Netcallidus) are working well and “successfully winning new clients” in line with its expectations. Furthermore, the agency said that "the board have approved plans to drive greater efficiencies across the company." Read the low-down on the update from specialist PLUS website Unquoted-AnaIyst for free by clicking HERE.