The stockmarket report from UK-Analyst.com for 23rd July 2010
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From UK-Analyst.com: Friday 23rd July 2010
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companies Britain’s economy surged in the second quarter of 2010, with gross domestic product expanding at a rate of 1.1%, its fastest pace of growth in four years, according to the Office for National Statistics. Meanwhile, lending to Britain’s private non-financial companies fell again in June but at a slightly slower pace than it had done earlier in the year, according to the latest figures from the British Bankers’ Association. Elsewhere, Hungary’s credit rating is set to be reviewed for possible downgrade after Moody’s Investors Service responded to the increased fiscal risks following the suspension of budgetary talks with the International Monetary Fund. At the London close the Dow Jones was up by 3.71 points at 10,326.01 and the Nasdaq was down by 6.47 points at 2,239.42. In London the FTSE 100 dipped by 4.16 points to 5,309.65; the domestically-weighted FTSE 250 climbed by 92.23 points to 10,095.41; the FTSE All-Share rose by 3.5 points to 2,743.95; and the FTSE AIM Index finished 2.87 points higher at 681.99. Brokers' Notes GE&CR reiterated its "compelling buy" recommendation for satellite communications provider Avanti Communications* (AVN), increasing its target price from 1,125p to 1,300p. Since the company announced a 70 million pounds placing to fund the procurement of a third satellite and to re-domicile the assets of its second satellite, Hylas 2, shares in the company have fallen. Despite this, the research house believes that the announced moves should benefit in terms of taxation and additional earnings potential. GE&CR does recognise that there is an element of risk - particularly with the company not yet having launched its first satellite. However, it believes that the suggested values indicate a share price “clearly” in excess of the current level. Avanti shares finished 11.5p lower at 465.75p. Arbuthnot issued a "buy" recommendation for the aerospace-focused specialist testing company Bodycote (BOY) with a 262p target price. This follows yesterday's first quarter reports from one of the group's largest customers, Precision Castparts Corporation. The firm reported sales in the first quarter of fiscal 2011 of 1.45 billion dollars (0.94 billion pounds), an increase of 5.6% over last year. This was driven by commercial aerospace Original equipment manufacturer (OEM) growth of approximately 15% and general industrial growth of approximately 50%. With aerospace fastener distributer demand now improving and seamless pipe demand also turning upwards, Precision is looking forward to a better second half to the year, Arbuthnot added. This can only be good news for Bodycote. The shares climbed by 7.4p to 239.5p.
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t1ps.com Seymour Pierce initiated its coverage of the oil and gas investor Energy XXI (EXXI) with a "buy" recommendation and 20 dollar (13 pounds) target price. The broker believes that the group offers a combination of strong management, a robust and growing production base and potentially spectacular upside in its ultra-deep asset position in the shallow waters of the Gulf of Mexico Shelf. In terms of valuation, it thinks the shares are "well underpinned" on the basis of its proved reserves along with the current ultra-deep drilling programme. The shares finished flat at 16 dollars. Westhouse Securities downgraded its recommendation for British oil company Dana Petroleum (DNX) from "buy" to "hold." The broker commented that the firm has made a strong run since the start of the month, when it was announced that Korea National Oil Corporation was in preliminary discussions regarding a possible cash offer. This, together with the news that Faroe Petroleum - in which it holds a 27.5% stake - had discovered oil in the Norwegian Sea, has sent shares climbing. In spite of this, Westhouse believes that the additional upside associated with a potential takeover is now limited, while the downside risks, should an offer not materialise, remain. Dana shares jumped 201p to 1,706p. Blue-Chips BP (BP.) shares dipped by 1.4p to 398.6p after the oil giant announced that relief well activities at the MC252 well site will be temporarily suspended because of “potentially adverse weather associated with Tropical Storm Bonnie”, which is projected to track into the Gulf of Mexico. This is on the back of the well being shut-in for integrity testing in the past seven days. The group added that the duration of the suspension will be dependent on the weather. United Utilities (UU.) reported a "sound underlying financial performance for the year". In a trading update for the four month period to 22nd July 2010, the company said that its financial position remains robust while its asset base continues to grow in line with expectations. In line with the group's policy, the board is proposing a final dividend of 23.13p per share, taking the total dividend for the 2010 financial year to 34.3p. The group added that despite a “tough price review”, it believes to be "well positioned to meet the challenges of the new five-year regulatory period." Shares in the company finished 3.5p higher at 567.5p. 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. Vodafone (VOD) shares climbed by 1.5p to 150.55p as investors tuned into news that the telecommunication group has returned to organic revenue growth since the global recession first impacted the business. The firm reported increased organic revenue growth of 1.1%, up 1.7% on the previous quarter, as each of the regions delivered improved services revenue trends. In Europe, data revenue growth accelerated to 23.3% as a result of strong Smartphone and mobile connectivity sales. The firm also generated good growth in South Africa, India and Turkey. Commenting on the performance, the firm continues to expect a full year EBITDA margin decline at a "substantially" lower rate than experienced in the 2010 financial year with the majority of the improvement occurring in the second half of the year. Evolution Securities sees modest upside to its 153p price target, and will be reviewing its "buy" recommendation. Mid-Caps Close Brothers (CBG) shares slipped 23.5p to 687p as the bank warned that it is still sensitive to the economic environment despite a marginal improvement in the bad debt ratio. In a trading update, the group reported that the loan book was 2.9 billion pounds as at 30th June 2010, up 12% from 31st January, with "good organic growth" particularly in Asset Finance, within the Commercial division, and from both Motor and Premium Finance in Retail. The asset management division's underlying results in the five months were subdued relative to the first half, the company said, despite investment gains in the third and fourth quarters. Its securities division meanwhile performed well but Close Brothers said trading was more difficult later in the second half. Nevertheless, the group remains confident that it will deliver a "solid overall performance" for the 2010 full financial year. Believing that the current market price represents fair value, Shore Capital retained its "hold" recommendation Salamander Energy (SMDR) reported no "significant hydrocarbons" in the target reservoir sections of its Tom Hum Xanh-1X well in Block 21, in the Vinh Chau Graben system, offshore southern Vietnam, after the well was drilled to a total vertical depth subsea of 2,103 metres. Commenting on this, James Menzies, CEO of the group, said that "with an intensive exploration programme we expect some dry holes." Despite this being a disappointing result, Westhouse Securities maintained its "hold" recommendation as the well did not represent a significant component of its valuation of the company. Shares in Salamander dipped by 0.4p to 223.6p.
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Report! Click here and find out how VectorVest values companies in your portfolio. Britvic (BVIC) shares fell by 13p to 505p despite the soft drinks company announcing better third-quarter sales. In a statement, the group reported that it increased revenue by 16% to 289.5 million pounds in the quarter on the prior year, with the underlying Great Britain, International and Irish businesses seeing a combined revenue increase of 6.9%. In the year to date, group revenue increased by 8.5% to 794.8 million pounds. Commenting on this, the board remains "confident of meeting current market expectations for the full year 2010 financial year." Small Caps, AIM and PLUS Metals Exploration* (MTL) shares jumped 2.75p to 13p following the Philippines-focused mining company confirming, and subsequently reviewing, the Solomon Capital offer to acquire the business. Solomon, which last year acquired a 44.1% stake in the company, is attempting to buy the rest of the company for 13p per share, valuing the company at 36 million pounds. If successful, Solomon said it will work to secure funding for the development of a mine at the Runruno project in the Philippines. Uranium Resources (URA) shares rallied 0.25p to 2.125p after the uranium exploration and development company raised 800,000 pounds through a subscription in the company. The funds will be utilised for the exploration of the company's uranium Mtonya Prospect, located in the Selous Basin in southern Tanzania where the company is currently undertaking a two phase drilling programme.
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Prospect Information and communication technology developer SciSys (SSY) announced that trading for the first half of 2010 has been in line with expectations and is expected to be consistent with current guidance for the 2010 full year. The company also continued to be "cash generative" with a "solid order book", the group added. Nevertheless, it remains cautious about the outlook for the second half of 2010 and for 2011 until the outcome of the U.K Government's public expenditure review and the Strategic Defence and Security review becomes clearer. Edison investment research continues to anticipate further operating margin expansion over the next three years, which would, in its view, support shares moving up to 70p. The shares finished flat at 49.5p. Velti (VEL) shares dropped 4.5p to 398.5p as the mobile marketing and advertising technology provider announced experiencing increasing demand for its products and services from existing and new customers. In a trading update, the firm said that it expects to report total revenues in excess of 40 million dollars (26 million pounds) for the six months ended 30th June 2010, up by 18% from the same period last year. The strong financial performance mainly reflects the popularity of Velti's performance-based solutions and success of its Software-as-a-Service (SaaS) model.
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ALTERNATIVE! Digital Barriers (DGB), the specialist provider of products and services to the homeland security market, announced the acquisition of the business and assets of the solutions division of Overtis for 3.2 million pounds. The group believes that the acquisition will enable the company to build a specialist mid-market business that can help protect key assets from attack. The shares finished flat at 135p. Sterling Energy (SEY) shares slipped by 4.75p to 121.25p subsequent to the energy company announcing that production in the Chinguetti field fell by 34% to 681 barrels of oil per day for the first half of the year as opposed to last year. As a result, group turnover decreased by 25% to 12.2 million dollars (7.9 million pounds) compared to same period in 2009. Nevertheless, the group posted a pre-tax profit of 0.1 million dollars (0.06 million pounds) as opposed to a loss of 15.7 million dollars (10.2 million pounds) in 2009. This reflects the lower cost of sales and lesser impairment of oil and gas assets. The company noted that it will not pay out dividends for the six month period. In spite of this, Evolution Securities is looking to the Sangaw North well in Kurdistan to continue producing positive news flow, regarding potential hydrocarbons, as it issued a "buy" recommendation and 250p target price. The Week AheadWe expect a busy week on the news-flow front from the blue-chips next week. Oil and gas company’s BP (BP.) and Royal Dutch Shell (RDSB) are due to provide the market on interims next week with National Grid (NG.) due to give its interim management statement on Monday. Later on in the week investors will be looking for a positive update from television broadcaster British Sky Broadcasting (BSY), which has recently seen shares rocket on news of a possible takeover by News Corporation. Amongst the mid-caps, airliner easyjet (EZJ) will be providing its interim management statement on Wednesday, with shares expected to continue improving following the volcanic disruption late-April. What investors will be looking for however is how the steps to cut government borrowing, such as higher taxes and public spending cuts, will hit consumer demand at automotive retailers Halfords (HFD) and Inchcape (INCH). Another mid-cap firm reporting next week is soap manufacturer PZ Cussons (PZC), shares in which have, more or less, only gone up since November 2008. Amongst the small-caps we look forward to trading updates from both property investor Workspace Group (WKP) and interactive learning technology company Promethean (PRW) on Tuesday and final results from ventures and management services company Angle (AGL). Angle’s shares have been moving up since announcing strong progress with NeuroTargets - its 25% portfolio company specialising in the relief of neuropathic pain - mid July. * 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 Avanti Comms.
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