Wednesday's Stock Market Report from UK-Analyst: featuring Lloyds, Leni Gas and Wolfson
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From UK-Analyst.com: Wednesday 4th August 2010
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download a preview of the magazine The coalition endured a fresh row as Simon Hughes, a senior Liberal Democrat, voiced his opposition to government plans to end council homes for life. Meanwhile, service sector companies reported weaker activity in July compared with the previous month, disappointing economists who said the rapid recovery in the second quarter was "a blip" that would disappear in the autumn. Elsewhere, strong corporate earnings could not stop risk markets from adding to a further sell-off from market highs, as the outlook for consumer-led growth around the world becomes increasingly murky. At the London close the Dow Jones was up by 24.07 points at 10,660.45 and the Nasdaq was ahead by 10.71 points at 2,294.23. In London the FTSE 100 dipped 10.32 points to 5,386.16; the FTSE 250 dropped 9.46 points to 10,126.41; the FTSE All-Share slipped 4.95 points to 2,778.08; and the FTSE AIM Index eased back 0.32 points to 691.23. Brokers' Notes Edison Investment Research reported on Leni Gas & Oil (LGO). The research house sees the group primarily as a near-term oil and gas field development and rehabilitation story, but also sees some longer-term upside offshore Malta and in the deep plays at the existing operations in Spain, Trinidad and the Gulf of Mexico. Over the next two or three years, Edison believes that the company has the potential to transition from junior to mid-tier exploration and production status as development activity boosts production and cash flows. All-in-all, it sees the stock as undervalued in regards to both forecast cash flow and prospective resources. Leni shares dipped 0.03p to 1.98p. Evolution Securities maintained its "buy" recommendation for the mining company Xstrata (XTA), and increased its target price from 1,075p to 1,125p. In its interims, the group reported results that were a "little ahead of expectations", driven by the strength of coal earnings. It also took the opportunity to announce its change of strategy and 14 billion dollars (9 billion pounds) growth pipeline. The broker believes that the key areas of growth will be in copper and nickel, although the firm is also investing in coal - both coking and thermal. Evolution added that the strong cash flow of the business, together with the sale of the Predeco holding and the skewing of capital expenditure into the second half of the financial year, all helped to reduce net debt. Xstrata shares climbed 7p to 1,079p. More right wing than Genghis Khan? Read James Faulkner's daily column Finn Cap reiterated its "hold" recommendation for industrial engineering company Rotork (ROR). The broker commented that the group's interim results were "satisfactory" and appear "well placed" to achieve full year expectations. Both revenue and adjusted pre-tax profit increased by 2.2% to 183.5 million pounds and 5.7% to 47.4 million pounds, respectively. It believes that the shares have underlying strength in spite of the fact that growth rates may appear less favourable than in recovery stocks. Given the acceleration in the order book and greater contribution from acquisition, Finn Cap expects a slightly higher profit figure in the second half of the year. In the longer term, however, it still regards the firm as a "high quality situation." The shares finished 8p lower at 1,504p. Brewin Dolphin retained its "buy" recommendation for the oil and gas exploration company Melrose Resources (MRS) with an increased target price from 416p to 420p. The broker commented that the continuation of "small successes" gives the group "strong production visibility and a rolling prospect inventory." This follows the recent announcement that the firm made a new gas discovery at its Kavarna East well in Bulgaria, with a net gas pay of 89 feet. The company also said it agreed to farm-down its interest in the Rhone Maritime block, offshore France, to Noble Energy. Under the agreement, Melrose, which currently holds a 100% working interest in the block, will retain a 27.5% interest, with Noble acquiring the balance and assuming operatorship. The shares slipped 1.6p to 304p. Blue-Chips Lloyds Banking Group (LLOY) returned to profit in the first half of 2010 from a loss a year earlier after lower bad debt charges boosted earnings. The group reported that it made a pre-tax profit of 1.603 billion pounds for the six months ending June, compared with a loss of 3.96 billion a year earlier. Total impairments fell to 6.55 billion pounds from 13.4 billion pounds a year ago against the backdrop of a stabilising economy, while lower costs also helped boost the company's profits. Commenting on this, the board continues to believe that the company is well positioned to deliver strong financial performance over the coming years. Execution Noble said "numbers are in line with what we were looking for, which was substantially ahead of the consensus." Consequently, the broker reiterated its "buy" recommendation. Lloyds shares climbed 2.57p to 74.49p. 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. Next (NXT) shares tumbled 170p to 2,029p subsequent to the fashion retailer reporting a marked slowdown in consumer spending. In a trading update, the group announced that sales at shops open at least a year fell by 1.5% in the first half of the year, down from the 0.8% decline reported after the first quarter. It believes consumer spending will be more restrained in the second half than in the first, as public spending cuts and tax rises begin to take effect. Consequently, the retailer is budgeting for like-for-like retail sales to be in the range of -1.5% to -4.5% in the second half. Furthermore, Next believes that profit before tax will be in the range 535 million pounds to 560 million pounds for the full year. This would represent an increase over last year of 6% to 11%. British Land (BLND) shares slipped 12.4p to 457.1p after the real estate investment trust announced that UK property market values rose only modestly in the quarter, reflecting in part a more uncertain economic outlook. Underlying profit before tax in the quarter was ahead at 64 million pounds with like-for-like income up 1.9% year-on-year. As at 30th June 2010, the value of its portfolio rose by 1.4% on the prior quarter at 8.7 billion pounds: growth was stronger in London Offices up 2.4% with Retail ahead by 0.9%. Net asset value per share rose by 2.2% to 515 pence over the same period. The company added that the risks to the global economy seem to have increased in recent months. Mid-Caps Premier Foods (PFD) shares sweetened 1.74p to 19.74p on news the food company remained on track to generate 100 million pounds of cash flow in 2010. Its cash generation was sufficient to service its financial obligations and to pay them down to reach the target level in the medium term, the group said. For the six months ended 30th June, pre-tax profit fell by 15% to 33 million pounds from last year, with revenue decreasing by 5.2% to 1.18 billion pounds. The company, whose current financing arrangements are in place until 2013, said it continued to have adequate headroom against the covenants agreed with its lenders. Panmure Gordon does not believe Premier’s cash generation target is sufficiently aggressive to make an impact on its position. As a result, the broker moved its recommendation from "buy" to "hold" with a lowered target price from 45p to 20p.
PLUS RETAIL ROADSHOW 2010 Salamander Energy (SMDR), the Asia focused oil and gas exploration company, announced that the Bang Nouan-1 exploration well in the Savannakhet PSC, Lao PDR has been plugged and abandoned after "no significant flow of hydrocarbons was observed." In a separate announcement, the group provided an update on the Kambuna gas-condensate field, offshore North Sumatra Indonesia. It reported that the rate of pressure decline in the main Belumai reservoir in the central area of the field implies a volume of recoverable gas lower than determined in previous reserve assessments. As a consequence, the firm reduced its net entitlement of proved and probable reserves by 1.8 million barrels of oil equivalent. Even though Panmure Gordon still has faith that the company can add value with the drill bit, it is reducing its target price from 370p to 330p while maintaining its "buy" recommendation. The shares tumbled 22.7p to 227.3p. Cookson Group (CKSN) shares slipped 25.6p to 453p despite the materials science company announcing "strong performance in the first half of 2010, ahead of its expectations. In its interim result for the first half of 2010, the group reported that revenue increased by 33% to 1,233 million pounds compared to the same period in 2009. Profits also rose by 103.8 million pounds to 120.3 million pounds from a year earlier. This reflected the continued recovery in its end-markets, the benefits of the significant cost reduction programme completed last year and increased market penetration of new, higher margin products. Cookson expects the group's second half performance to be slightly ahead of the first half. Brewin Dolphin is confident in the long term potential of the group and, thereby, retained its "buy" recommendation and 732p target price. Small Caps, AIM and PLUS Forbidden Technologies* (FBT) shares jumped 2p to 22p following the video platform FORscene developer announcing that Renegade Pictures is using FORscene for the production of its fourth series of 'Don't Tell the Bride.' The series is about the planning of a wedding in which the groom must decide on every detail, from venue to wedding dress, without any input from the bride. The production team used FORscene for logging, rough-cut editing and wide-area review and approval. Petro Latina Energy* (PELE) reported positive developments at its La Paloma Los Angeles and Santa Lucia fields. In an operational update, the company announced that it has "successfully" installed electrical submersible pumps (ESPs) in its Colon-1 and Colon-2 wells and commenced drilling operations on Santa Lucia-5, completing the company's licence commitments. The group added that initial results on its new Querubin-1 exploratory well were also "encouraging." Shares in the company finished 0.25p lower at 51.5p.
Do you have any gold exposure in your
portfolio? IS Solutions (ISL) shares rallied 2.5p to 32p after the hardware sales and facilities management company signed a global partnership with business analytics software company SAS Institute. Under the terms of the one year rolling contract with SAS, IS Solutions will have the first right to implementation services for all Customer Experience Analytics (CXA) product sales in the Americas. It will also provide complete managed services, including support and hosting, in the rest of the world. Statpro (SOG) shares tumbled 10.5p to 105.5p despite the portfolio analytics provider delivering a solid performance. In the first half of 2010, the company reported revenue growth of 7% to 16.63 million pounds compared to the previous year. Adjusted profits before tax are also up 6% to 3.36 million pounds although operating margins were down slightly to 22.2% from 23.5% due to increased investment in products and sales infrastructure. During this period, the firm continued to build its pipeline of prospects and had some notable successes in Asia and South Africa as well as its main markets of North America and Europe. Commenting on its performance, the company is "confident...of a successful outcome to the year."
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companies Allied Irish Bank (ALBK) said its loss in the first half of 2010 widened to 1.73 billion Euros (1.43 billion pounds) from a loss of 786 million Euros (651 million pounds) a year ago, after losing 963 million Euros (798 million pounds) on the first tranche of National Asset Management Agency transfers. It said it remained on track to carry out "a placing and/or a rights issue" in the fourth quarter to raise the rest of the 7.4 billion Euros (6.1 billion pounds) required after the asset sales. Shares in the company fell 5 euro cents to 94 cents. Semiconductor group Wolfson Microelectronics (WLF) reported another loss but has predicted a return to profit later this year when new products are launched. The group made a half year pre-tax loss of 10.7 million dollars (6.7 million pounds), a 17% increase on last year as sales grew by more than 10.5% to 64.5 million dollars (40.6 million pounds). The company continued to make good progress with sales growth across most application segments and overall revenues up both year-on-year and sequentially. Additionally, Wolfson saw the launch of another 18 new products and an increasingly strong design-in performance. Looking ahead, it expects revenue growth and a return to profitability in the third quarter. The shares rose 3.25p to 180.25p. * The company is a corporate client of Rivington Street Holdings, the ultimate owner of this website; the T1ps Smaller Companies Growth Fund, which is advised by T1ps Investment Management, a subsidiary of RSH, owns shares in Forbidden Technologies.
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