Wednesday's Stock Market report from UK-Analyst: featuring Carphone Warehouse, Lamprell and Compass Group
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From UK-Analyst.com: Wednesday 28th July 2010
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download a preview of the magazine Britain should not expect a speedy economic recovery, Mervyn King, governor of the Bank of England told MPs, adding that there was “some considerable distance to travel before we can begin to use the word ‘normal’”. Meanwhile, the emergency Budget makes little difference to the likelihood of a double dip recession, according to a leading economics think-tank. Although there is about a 19% chance that the economy will contract next year, according to forecasts from the National Institute of Economic and Social Research, that is only slightly higher than the 14% possibility of another recession under Labour’s existing fiscal plans. At the London close the Dow Jones was down by 13.17 points at 10,524.52 and the Nasdaq was down 11.57 points at 2,276.68. In London the FTSE 100 slipped 48.14 points to 5,317.53; the FTSE 250 fell 64.32 points to 10,042.11; the FTSE All-Share dropped 23.68 points to 2,744.35; and the FTSE AIM Index moved 1.31 points lower to 683.82. Brokers' Notes GE&CR initiated coverage of the e-procurement software developer @UK* (ATUK) with a "speculative buy" recommendation and 2p target price. The research house believes that the company is approaching critical mass and, had it not been for the uncertainties created by the election and subsequent emergency Budget, the company would have reported a profit this year. Once critical mass is achieved, the business should become sustainably profitable and cash generative, especially if it maintains rigorous control on costs and continuous investment in the product and service offering. Furthermore, the actions of the government to eliminate the budget deficit ought to be favourable for the company because its entire offering is orientated toward helping all clients save money and maximise revenues. @UK shares finished flat at 1.05p. Evolution Securities downgraded its recommendation to “neutral” for the telecommunication group Vodafone (VOD) while increasing its target price by 3p to 156p. The broker said that, despite returning to growth earlier than expected, only Indian trends really stood with services revenue growth of 14%. Underperformance elsewhere was blamed on not having the rights to sell the iphone. Evolution was encouraged by both the group's 1.1% service revenue growth in the first quarter of the financial year and the company's willingness to sell non-core assets. However, it also believes that these positives are offset by the underwhelming operational performance relative to its peers as well Verizon's reluctance to agree a formal dividend policy, which Vodafone owns a 45% stake in. The shares fell 1.95p to 148.25p. See all of Evil Knievil's latest trades Panmure Gordon reiterated its "buy" recommendation and 2,476p target price for the clothing retailer Next (NXT). Ahead of the group's half year results to 31st July being announced next week, the broker believes that the "good" weather in May and June is likely to have boosted the company's performance. It expect the firm to report retail sales growth of 3.5% for the first half of the financial year while life-for-like sales, excluding direct, is expected to be remain unchanged. Although the market expects U.K. macro backdrop to weaken slightly, Panmure said, retail sales have been resilient especially over the past two months. The timing of the U.K. VAT increase has been benign and should even allow retailers to tuck away some extra gross margin before the tax increase comes into effect. Next shares dropped 14p to 2,166p. Edison investment research commented on the mining company Baobab Resources (BAO). The research house said that the group has released “potentially significant updates” with respect to the drilling programme at its Tete project and also a capital injection from a third party into its Changara deposit. While the firm made no estimate of resources based on the drill holes, Edison calculates that they are indicative of a resource of approximately 198.5 mega tonnes at 26.1% iron. In total, therefore, it estimates that these could increase Baobab's resource base to approximately 246.2 mega tonnes at 25.9% iron. As such, they go a long way to confirming the plausibility of the company's 300-700 mega tonnes exploration target. The shares climbed 0.75p to 8p on the note. Blue-Chips Tullow Oil (TLW) announced that the Ngiiri-2 appraisal well, which is located in the Butiaba region of Uganda Block 1, has encountered over 40 metres of net oil bearing reservoir in two zones. The well was drilled to a total depth of 892 metres. Arbuthnot expects the share price to strengthen on the back of this announcement and, therefore, reiterated its "strong buy" recommendation and 1,514p target price. Tullow moved 12p ahead to 1,285p. Invensys (ISYS) shares slipped 13.9p to 279.1p despite the engineer announcing that it was on track to deliver a better performance for the year. The company's Operations Management produced a solid performance in the first quarter. Its Controls business saw higher volumes in North and South America, it said, and early signs of improvement in Europe. At Invensys Rail, underlying operating margins in the first half was in line with the group's target of 17-18% and it expects operating margins in the second half to be at least in line with target levels. Looking forward, the group said, its large order book in its rail business, with 46% relating to projects in new markets, should help offset any spending cuts by governments in the UK and Spain. 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. Compass Group (CPG) announced that organic revenue grew at 5.5% in the third quarter. This growth has been driven by increased new business wins across the foodservice group and a slight improvement in the rate of retention. Like-for-like volumes in the Business & Industry and Sports & Leisure sectors remain challenging but are now broadly level with the same period last year, the group commented. Looking forward to the full year, the firm now expects organic revenue growth to be over 2.5%. Evolution Securities believes that there is real momentum building within the firm which is "yet to be fully reflected" in the shares. The broker, thereby, reiterated its "buy" recommendation and 640p target price. Compass shares travelled 16p south to 542p. Mid-Caps Brit Insurance (BRE) shares jumped 91.5p to 1,005p following confirmation that Apollo has submitted a revised proposal to acquire the insurance group. Apollo has raised its takeover bid to 10.75 pounds a share, valuing the firm at about 850 million pounds. UK-based Brit said that the latest approach includes a 30 pence dividend and that the due diligence period is expected to take a number of weeks. In the separate announcement, the group reported a pre-tax profit of 72.8 million pounds for the six months to end June, up 12.2% to same period last year. This was helped by a return on equity, excluding the effect of foreign exchange on non-monetary items, of 16.9%, compared with 11% in the same period last year. British chip designer CSR (CSR) nearly doubled revenue as it returned to operating profit in the second quarter, helped by demand from carmakers, but its cautious stance on the global recovery sent its shares down 59.2p to 355.5p. The company, whose chip range includes its traditional stronghold Bluetooth, Wi-Fi and GPS, posted revenue of 220.7 million dollars (141.4 million pounds), up from 112.9 million dollars (72.3 million pounds), and operating profit of 24 million dollars (15 million pounds) against a 4.6 million dollars (2.9 million pounds) loss a year ago. The firm, however, said it was seeing growing caution in the global economic outlook for the second half, and chip-making capacity was becoming constrained, reflected in its guidance for third-quarter revenue between 220-235 million dollars (141-151 million pounds). Seeing the valuation as "attractive", Seymour Pierce retained its "buy" recommendation and 554p target price.
Hot new small cap tip published yesterday on WatsHot.com Lamprell (LAM) shares rallied 17.9p to 264p after the oil and gas engineer announced receiving a 317 million dollars (204 million pounds) new contract award from National Drilling Company. The contract is for the construction and delivery of two jack-up rigs valued at 158.5 million dollars (102 million pounds) each with additional optional equipment orders valued at 12.6 million dollars (8 million pounds) per rig. As part of the contract, National Drilling Company has options for Lamprell to build two further jack-up rigs, exercisable during the 12-month period commencing on 1st August 2010. Each option includes additional optional equipment orders. Brewin Dolphin commented that "this is excellent news for Lamprell as the new build jack-up market has been depressed for many months." The broker issued a "hold" recommendation with a 240p target price. Carphone Warehouse (CPW) shares jumped 14.75p to 230.75p after the mobile phone retailer reported making a "good start to the year", meeting its expectations and enabling it to reiterate its full year guidance. In its Carphone stores across Europe, sales open at least a year rose by 3.7%, at constant currencies, in its first quarter of the financial year as it benefited from increased usage of smartphones. In the US, Best Buy Mobile continued its rapid growth as it out-performed expectations. Virgin Mobile in France delivered on the promise of its Tele2 acquisition, with the integration well advanced and the business delivering good profit and cash flow. Finally, following the "excellent" customer response, the firm is delighted with the launch of the first three Big Box Best Buy stores in the UK. Small Caps, AIM and PLUS The building systems and software provider Eleco Holdings (ELCO) shares fell 1.75p to 19.75p following a poor yearly performance. In a trading update for the year ended 30th June 2010, the company anticipates that markedly improved profits from its Software operations will be more than offset by significantly greater than anticipated losses from its Building Systems operations, in particular from the precast concrete and timber frame businesses. As a consequence the group loss before non-recurring items and reorganisation costs is expected to be significantly worse than anticipated. Eleco is confident that the reduction in the cost base of its Building Systems operations achieved in the year just ended, together with the restructuring of these operations, and the introduction of detailed recovery plans will enhance considerably the company's ability to compete in this market sector.
Do you have any gold exposure in your
portfolio? Coms (COMS) shares climbed 0.375p to 3.25p as it launched a new division to support Microsoft's unified communications products, known as Office Communications Server (OCS). The new division will work closely with voice and video services specialist Microsoft Gold Partners to design OCS solutions and supply the necessary enabling-technology and internet telephony and video services. Separately, the company's subsidiary VCOMM completed the shipment of its largest order to date to Wandsworth Health Authority for equipment and services exceeding 100,000 pounds to enable it to implement an OCS solution. The restaurant operator Individual Restaurant (IRC) announced that the impact of the extreme weather conditions, in the first two weeks of this year, and the Football World Cup, at the end of the period, have had an adverse effect on trading. In a trading update for the 26 weeks period to 4th July 2010, the company said that the combination of these "exceptional factors" will negatively impact the performance for the current year by approximately 0.6 million pounds at the profit before tax level. However, since England's participation in the World Cup ended, the pattern of like-for-like sales has resumed. The shares slipped 1.5p to 11.5p. Air Partner (AIP) shares ascended 27.5p to 317.5p after the charter-plane supplier said that "trading has remained good throughout the fourth quarter." As a result, the company now expects full year profits, on an underlying basis, to be ahead of its revised expectations. The firm added, however, that forward visibility remains poor and it remains sensitive to any further deterioration. The board reiterated its intention to recommend a dividend at the full year.
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Report! Click here and find out how VectorVest values companies in your portfolio. PLUS-quoted company Rivington Street Holdings* (RIVP) announced that it is acquiring the contractual rights of the investment advisory and administrative services to three Enterprise Investment Scheme vehicles with a total funds under management of two million pounds. The media and financial services group is paying 20,000 pounds for the rights to manage the funds, which was previously managed by Pre-X Capital Management before it went into administration. T1ps Investment Management, a wholly owned subsidiary of Rivington, will act as investment advisor to the funds. Its funds under management now stand at 19.1 million pounds prior to the inclusion of the funds, up 35% from the previous year. * @UK is a corporate client of Rivington Street Holdings, the ultimate owner of this website. Rivington Street Holdings is the ultimate owner of this website.
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