Monday's Stock Market Report from UK-Analyst: featuring Tullow Oil, Pearson and Connaught
Print this Article|
From UK-Analyst.com: Monday 26th July 2010
RBS Markets introduces to you to MARKETS Direct -
Free subscription This edition's hottest topics include: The election special, an interview with Ross Walker, Are Emerging Markets on the fast-track to recovery? Has gold hit its peak? Currency trends for 2010? Are interest rates set to rise globally? And much more.
Click here to
download a preview of the magazine Banks may face a new tax on gross profits if they fail to curb their bonuses and dividends to increase lending to small and medium-sized business, the business secretary Vince Cable warned. Meanwhile, after weeks of prelude, the euro zone stress tests results showed that just seven of 91 euro zone banks needed extra capital, with every large bank passing as regulators used a methodology that failed to take into account exposure to the "doomsday scenario" of a possible sovereign default. Elsewhere, international energy groups are set to miss out on billions of dollars of future sales during the next decade as China, their most voracious customer, aggressively develops its own large gas reserves and drastically cuts its imported gas requirements, a new study from the industry consultant Wood Mackenzie shows. At the London close the Dow Jones was up by 67.81 points at 10,492.43 and the Nasdaq was up by 17.55 points at 2,287.02. In London the FTSE 100 climbed 30.69 points to 5,343.31; the FTSE 250 rose 31.35 points to 10,125.02; the FTSE All-Share advanced 16.59 points to 2,760.16; and the FTSE AIM Index rose 4.82 points to 687.35. Brokers' Notes GE&CR issued a "buy" recommendation for the telecommunications solutions company Pinnacle Telecom* (PINN) with a 53p target price. Whilst the market for hosted business-to-business telephony is still embryonic, the group's service offering has been steadily strengthened and the company is leading the market with its hosted voice (VoIP) solution, which has been fully endorsed and used extensively by the BBC. The research house estimates that by the end of the 2011 financial year, the group will be profitable and increasingly cash generative, such that Pinnacle will close the year with net cash of 581,000 pounds in the highly unlikely event of no further acquisitions. The shares climbed 0.03p to 0.3p. Read Tom Winnifrith's weekend editorial here Evolution Securities retained its "sell" recommendation for AstraZeneca (AZN) with a 2,850p target price, ahead of the pharmaceutical company's results on Thursday 29th July. Even though the broker expects the firm to release a "strong set of results" for the second quarter, it also expects a "significant sales decline by 2020." Evolution believes that earnings progress will be harder to maintain as a result to experiencing generic competition to its anti-biotic drug Merrem XL and breast cancer treatment drug Arimidex. It also thinks that increasing competition to Toprol XL - the high blood pressure medication - and negative foreign exchange will not help either. Furthermore, the broker added that the earnings release will be overshadowed by the Food and Drug Administration advisory panel for the new anti-clotting drug Brillinta on 28th July; and in advance of that it places a 60% chance that Brillinta will obtain some form of approval recommendation. The shares slipped 20.5p to 3,126p. Collins Stewart retained its "buy" recommendation for the financial services group Close Brothers (CBG) with a 1,000p target price. After the trading statement last week, the broker has increased its revenue forecast for the 2010 financial year by 3% to 540 million pounds, driven by a 23% growth in loan book. Even though it expects the banking division to increase the firm's profits by 48% to 80 million pounds, it has kept its overall profit expectations unchanged, expecting it to be offset by the "material" fall in income in the securities division. Close shares rose 6.5p to 693.5p.
Hot new small cap tip out tomorrow on WatsHot.com Panmure Gordon reiterated its "buy" recommendation and 400p target price for the wireless solutions company CSR (CSR). The broker expects the group to report another quarter of strong revenue growth, which is says demonstrates that the business is benefiting from an "improving market position". The concerns that have driven the stock to underperform its peer over the past quarter are "without merit", Panmure added, believing that now is an exciting time for the firm. It expects future growth in Smartphones to be driven by the fact they are getting cheaper and believes its GPS solution is also strongly positioned to benefit from increased attach rates. CSR shares moved 4p higher to 411p. Blue-Chips Tullow Oil (TLW) shares rallied 60p to 1,239p after the oil and gas producer announced that the Owo-1 exploration well in the Deepwater Tano license offshore Ghana has discovered light oil. Results of drilling, wireless logs and samples of reservoir fluids have established Owo as a major new oil field requiring further appraisal. The deviated well, which was drilled to a final depth of 3,891 metres, has encountered a gross vertical reservoir interval of 154 metres containing 53 metres of net oil pay in two zones of "high quality" stacked reservoir sandstone, the group reported. Commenting on this, Westhouse Securities sees this as "another positive result" for the company offshore Ghana, which it believes demonstrates the upside that still remains in the region. It maintained its "buy" recommendation and 1,573p target price. Pearson (PSON) shares jumped 56p to 1,029p as the educational technology provider announced strong growth in all businesses. The group reported that revenues for the six months ending 30th June 2010 were up by 9% to 2.34 billion pounds; whereas pre-tax profits, adjusted for currency movements and other factors, were 203 million pounds compared with 111 million pounds for the same period last year. This was attributable to "healthy trading conditions", the firm said, in its major growth markets - US higher education, educational assessment, international education, digital learning. Consequently, interim dividends were raised by 7% to 13p and the group is now expecting earnings per share of 70p in 2010, compared with 65.4p on the same basis in 2009. Markets Move Fast. Keep up with GFT's Free Guide. Learn to Harness Market Volatility.
Determine if a market is in trend or range (and what that
means) Click here to download your Guide. Reckitt Benckiser (RB.), the household cleaner maker, warned of slowing European growth as it beat forecasts with a jump in profits. The British group which makes nearly half its sales in Europe said growth had virtually disappeared in its markets there, and it was having to raise spending to hold on to market share as rivals turned up the competitive pressure. Reckitt, which also makes Cillit Bang cleaners, Nurofen painkillers and Lysol disinfectants reported its European second quarter underlying sales dipped by 1% to 846 million pounds while operating profits were unchanged at 195 million pounds from a similar period last year. Despite this, the firm reported increased sales and net income by 10% to 2.06 billion pounds and 23% to 380 million pounds, respectively. Shares in the firm finished 3p lower at 3,333p. Mid-Caps Connaught (CNT) shares crashed a further 70.64p to 31.46p on news of a cash shortage. Following a detailed review undertaken by the facilities management group, it has identified an urgent requirement for additional funds to meet the current and ongoing needs of the business, in part caused by additional pressure from suppliers and sub-contractors. The firm has also concluded that net debt will be significantly in excess of the previously advised level of 120 million pounds at its year end of 31st August 2010 and that it will breach its banking covenants. It has therefore entered into negotiations with its lenders to secure additional funding. Collins Stewart has downgraded its recommendation from "hold" to "sell", concerned that a "further lurch down in the shares will make any rights issue highly dilutive." Shares in Pace (PIC) jumped 26.5p to 214p following the digital TV set-top box technology developer announcing the proposed acquisition of the broadband company 2Wire. The 475 million dollars (308 million pounds) acquisition is inclusive of the group's balance sheet at closing, anticipated to be approximately 55 million dollars (36 million pounds). The board believes the acquisition is a logical extension of its successful strategy and will enhance its established position in cable and satellite markets in the U.S. with entry into the tier one telco market. In a separate announcement, the firm reported increased revenues by 21% to 635.2 million pounds for the six months ended 30th June 2010, and profit before tax up by 46% to 45.4 million pounds. This was helped by the consistent strong demand from Pace's global pay TV markets leading to increased volume shipments up by 12.9% to 9.6 million pounds. Encouraged by this, Seymour Pierce retained its "buy" recommendation and 270p target price.
Get free annual reports on a wide range of
companies Telecity (TCY), the network data centres provider, announced that it will make a filing with the U.S Securities and Exchange Commission to establish a sponsored Level 1 American Depositary Receipt (ADR) programme. An ADR is a security that has been created to permit U.S. investors to hold shares in non-US companies and trade them on securities markets in the United States. This will trade on the Over-the-Counter market, replacing the current unsponsored ADR programme. Telecity shares moved 3.8p ahead to 440.1p. Small Caps, AIM and PLUS Fieldbury (FIE) shares rallied 0.45p to 2.25p on news that the self-powered technology provider has entered into a conditional agreement to acquire the mobile company MobileWave for a total consideration of 1.1 million pounds. The board believes that MobileWave is well positioned to benefit from the roll-out of a "new and exciting product", the PlanetOi' technology platform. Furthermore, the proposed acquisition will constitute a fundamental change of business for Fieldbury and the company will become a trading company as opposed to remaining as an investment company, the firm added. Bio-mass supplier Viridas (VIR) entered into a strategic development and partnership agreement with an unnamed U.K. energy generator to supply them with 240,000 tonnes per annum of sustainable bio-mass for electricity generation. It is anticipated that this partnership will lead to the signing of a sustainable bio-mass "off take" agreement between the parties. Commenting on the agreement, the firm said that this, "coupled with the bio-oil agreement already in place with INEOS, will give Viridas gross revenue potential in the region of 1 billion dollars (0.65 billion pounds) over the next ten years." Arbuthnot sees this as a "significant step forward in the development of the company," and thereby continues its coverage with a "strong buy" recommendation and 15p target price. Viridas shares jumped 1p to 5.75p.
Gold set to head higher - will it be $1500 or
$3,000 Plant Health Care (PHC) shares moved 14p higher to 139p after the naturally derived products provider, signed a non-exclusive agreement with the crop protection company Syngenta, to develop and market Plant Health Care's Harpin protein as a foliar spray in combination with Syngenta's herbicide products containing glyphosate. In trials, Harpin has been shown to significantly increase yields on a variety of crops when applied in combination with other active ingredients including glyphosate and fungicides. The board of Plant Health Care believes that this deal "further validates the potential of the company's Harpin technologies." Burst Media (BRST), the international online advertising services company, warned that its "underperformance over the period is likely to result in the company's overall profitability for the full year being materially below market expectations." This was heavily linked to the poor performance of the recently acquired Giant Realm business. In spite of this, the firm estimates total revenue to be 17.3 million dollars (11.2 million pounds) for the six months ended 30th June 2010, up 43% compared to the same period last year. The shares tumbled 1.875p to 5.25p. Newmark Security (NWT) shares dropped 0.18p to 1.93p as the security solutions group anticipates lowered revenues for the first half of the current year due to the temporary postponement of orders prior to the general election and the emergency budget. Despite this, the company reported increased turnover by 6.4% to 13.8 million pounds with the Asset Production division showing strong revenue growth of 18% at 7.5 million pounds. Profits increased by 3% to 1.7 million pounds. Commenting on this, the board is "satisfied" with the group's current trading performance and is "cautiously optimistic" as to the future outlook of the company. Seymour Pierce believes that the firm occupies "strong market positions" in electronic access control and retail asset production, which it says are "growing markets." Consequently, it reiterated its "buy" recommendation and 2.4p target price.
Download your FREE VectorVest Stock Analysis
Report! Click here and find out how VectorVest values companies in your portfolio. PLUS-quoted company, Netalogue (NTLP) announced that its intellectual property has increased significantly over the last year enabling it to secure longer term, higher value contracts. In a trading update, the e-commerce solution developer said that its software assets and expertise in e-procurement and supply chain relationships is proving to be a unique aspect of its complete solution and service offering, which can simultaneously reduce costs and increase sales. The board added that it is exploring additional "growth opportunities" through sub-licensing its intellectual property. Another PLUS-quoted company reporting was Avation* (AVAP). In response to an analyst's question regarding a listing on the London Stock Exchange, the aircraft leaser said that this may see the prior withdrawal of the company's shares from the PLUS-quoted market. Furthermore, the firm added it has appointed the law firm Speechly Bircham to advise it in regard to the proposed move. * The company is a corporate client of Rivington Street Holdings, the ultimate owner of this website.
|
