Tuesday's Stock Market Report from UK-Analyst: featuring Gartmore, Compass Group and Resolution
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From UK-Analyst.com: Tuesday 17th August 2010
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message The Labour government failed to act quickly enough to defend industry and the coalition risks making the same mistake, according to the Labour party’s business spokesman. Meanwhile, inflation fell to 3.1% in July but remained more than one percentage point above the Bank of England’s target, forcing Mervyn King, the bank’s governor, to write to George Osborne, chancellor, for the second time to explain why inflation is so high. Elsewhere, Ukraine will halve its 2010 grain exports, adding pressure to markets already grappling with Russia’s drought-induced grain export ban, while the world’s top wheat buyer Egypt remains set on importing 6 million tonnes. At the London close the Dow Jones was up by 126.21 points at 10,428.22 and the Nasdaq was up by 33.99 points at 2,215.86. In London the FTSE 100 jumped 69.98 points to 5,346.08; the FTSE 250 climbed 126.32 points 9,900.55; the FTSE All-Share rose 34.81 points to 2,751.77; and the FTSE AIM Index finished 2.87 points higher at 687.14. Brokers' Notes GE&CR issued a "speculative buy" recommendation for the, soon to be, PLUS-quoted company Metallum*. The research house was impressed with the mining company's assembled select group of highly prospective licenses on the back of its analysis of the TELLUS data package – a £6.5 million UK government initiative of digital high-resolution airborne geophysical and integrated ground geochemical surveys covering the whole of Northern Ireland. It said that the group is yet to define a resource, but with a listing on PLUS and first results from Fore Burn's drill programmes expected in the fourth quarter, any positive news would be expected to see a significant re-rating of the stock. As the company works towards the definition of a resource, further price appreciation should be expected, GE&CR concluded. Brewin Dolphin moved its recommendation for the engineering consultancy company WS Atkins (ATK) from "reduce" to "hold", and increased its target price from 620p to 800p, following the acquisition of PBSJ, a US engineering and design firm. The broker believes PBSJ is a transformational deal for Atkins which provides a platform for expansion in the vast US infrastructure market and significantly improved geographical diversity ahead of what is likely to be a difficult period in the UK. Brewin upgraded its 2012 earnings per share forecast by 8% and thinks there is scope for further upside as it expects the group management to be able increase margins in PBSJ to above the recent historical level of 4%. In summary this looks to be a sensibly priced and timely deal, the broker concluded. The shares finished 2.5p lower at 745p. Quality investment tips - limited to just 200 subscribers Evolution Securities reiterated its "reduce" recommendation and 230p target price for the mining group Aquarius Platinum (AQP). The company's 2011 financial year is underway, and the broker expects the first quarter to be tougher than the fourth quarter of 2010. So far, the mean platinum price has been around 100 dollars (64 pounds) per ounce less than it averaged in the previous quarter, and the rhodium price has fallen from the recent highs of almost 3,000 dollars (1,916 pounds) per ounce to just over 2,100 dollars (1,341 pounds) per ounce as the reality of the post-stimulus slump in the auto industry bites. Evolution thinks that, in the near term, the platinum business is one of the more challenging mining sub-sectors in which to be operating. Aquarius shares climbed 13.9p to 270.6p. Seymour Pierce retained its "hold" recommendation and 118p target price for London & Stamford (LSP) following the commercial property investor's publication of the scheme circular. The scheme covers a number of propositions, including: the election of the group for real estate investment trust; moving up to the main market; and internalisation of management. Commenting on the detailed document, the broker said that the move is strategically very positive and beneficial for shareholders which will enable the business to pay good dividends from income in future years. In fact, Seymour anticipates dividends doubling from historical levels in two years. The shares dipped 0.75p to 115.25p. Blue-Chips Compass Group (CPG) shares climbed 12.5p to 518p after the food service business announced the acquisition of Tirumala Hospitality Services Private from Mr Ramkrishna Mankari and his family. Tirumala is a strong regional player in the foodservice industry in Western India, specialising in the provision of catering services to the Business and Industry sector. The gross assets of the business acquired were 105.2 million Indian rupees (1.4 million pounds) with revenue for the 12 months to 31st March 2010 of 271.6 million Indian rupees (3.7 million pounds). Shore Capital believes that any concerns over global austerity may be overplayed with less than 10% of revenue estimated to be generated directly from Government bodies. The broker, thereby, retained its "buy" stance. 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. Royal Bank of Scotland (RBS) shares rose 1.33p to 47.25p subsequent to the bank announcing the sale of a 1.4 billion Euro (1.15 billion pound) portfolio of primarily senior loans to a fund managed by Intermediate Capital. IC, the FTSE 250 listed investment firm and fund manager has approximately 11 billion Euros (9 billion pounds) under management in proprietary capital and third party funds. Commenting on the transaction, the RBS said, "this sale is in line with the group's strategy to reduce its funded balance sheet and exposure to its existing leveraged loan book within its Non-Core Division." Mid-Caps Fund manager Gartmore (GRT) said it continued to lose clients over the past three months, hitting its assets under management. The group reported a fall in assets by 9% to 20.3 billion pounds at the end-July, after 1.9 billion pounds of outflows in the first seven months of the year. That compares with around 22 billion pounds on 4th May, following Rambourg's suspension as part of an internal probe that raised investor questions over the company's internal procedures, and stands in contrast to an industry that is seeing some clients return. "We are now focussed on regaining momentum and believe we are attractively positioned to benefit from the continuing demand for absolute return products and the general growth potential of our UK retail business," commented chief executive Jeff Meyer. Gartmore shares rose 3.5p to 122.6p. The support services and construction company Carillion (CLLN) has been awarded a five-year extension to its existing contracts with EDF Energy Networks, worth 40 million pounds per annum. The group's existing 4-year contracts with EDF Energy Networks, which began in 2007, are being extended from January 2011. Under these contract extensions, Carillion will deliver infrastructure services for sub-stations and cabling to support the electricity network in the East of England. Seymour Pierce continues to believe that public sector cuts will generate substantial opportunities for private outsourcing companies such as Carillion. Ahead of next week’s interim results announcement, the broker reiterated its "buy" recommendation and 380p target price. The shares responded by moving 7.5p higher to 300.7p.
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download a preview of the magazine Resolution (RSL) shares rallied 8.3p to 254.3p after the British insurer swung to a half-year profit. The company's acquisition of Friends Provident last year helped the group post an operating profit before tax of 203 million pounds for the six months ending June, compared to a loss of 7 million a year earlier. Friends Provident contributed 211 million pounds to this amount as new business profits were up by 153% to 81 million pounds. The company added that it would examine further acquisition opportunities in Britain and overseas, although chief executive John Tiner said one of its key priorities for now would be integrating the AXA UK business. "They were a decent set of figures, with recovering profits at Friends Provident, and the dividend has a yield of 6.6%," said Oriel Securities, who has a "buy" rating on Resolution shares. Melrose Resources (MRS), the oil and gas explorer, posted a 32% rise in first half profits driven by higher oil prices. For the first-half ended 30th June, pre-tax profit was 26.2 million dollars (16.7 million pounds), compared with 19.8 million dollars (12.6 million pounds) in the year-ago period. Revenue climbed 13% to 110 million dollars (70 million pounds), while working interest production rose 13% to 40.1 thousand barrels of oil equivalent per day (mboepd). Commenting on this, the company anticipates increasing its production levels when its new Kavarna and Kalikakra gas field developments come on stream in Bulgaria. Following a "solid set of result with no surprises of note," Brewin Dolphin retained its "buy" recommendation and 420p target price. Melrose shares finished 10p higher at 309p. Small Caps, AIM and PLUS Central African Gold (CAN), the gold mining and exploration company, entered into a loan facility agreement with its major shareholder, New Dawn Mining Corporation, to provide Central Africa Gold with up to 2.0 million dollars (1.3 million pounds) to support its Zimbabwean mining operations. The funds will be made available to both its Falcon Gold Zimbabwe and Olympus Gold Mines subsidiaries to support ongoing operational and working capital requirements. The agreement does not have a maturity date and is repayable on demand. In a separate announcement, in a trading update for the quarter ended 30th June 2010, the miner reported revenue of 3.5 million dollars (2.2 million pounds) from the sale of 2,974 ounces of gold, as compared to revenue of 3.8 million from the sale of 3,427 ounces of gold for the quarter ended 31st March 2010. The shares moved 0.1p ahead to 0.9p. Silverdell (SID), the specialist environmental services group, announced a number of additional asbestos removal and consultancy framework contract wins, sending its shares 0.5p higher to 8.5p. These include frameworks for four NHS Trusts in the South East and Midlands to support compliance in respect of asbestos management, in addition to being appointed to complete contracting works on the refurbishment of a hospital in South Wales. "These framework contract wins have the potential to add in excess of 6 million pounds of revenue to our long-term order book and are a key element in the delivery of our long term strategy," chief executive Sean Nutley said in a statement.
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Prospect President Petroleum (PPC) said it has secured a suitable drilling rig to drill the Northumberland 2 exploration well in the Otway Basin, South Australia, following the shortage of suitable drilling rigs in the area. The combined prospective resources of the reservoirs are assessed at 40 million barrels of oil or 55 billion cubic feet of natural gas and the well total depth is 3,200 metres. Commenting on this, chairman Stephen said, “the well marks the beginning of the next phase of activity aimed at converting the significant prospective resources into reserves and production.” In addition to drilling activity, the group plans to discuss further investment, such as additional 3D seismic, with the South Australian authorities. Encouraged by this, Evolution Securities issued a "buy" recommendation and 100p target price. President shares rose 3.25p to 65p. Freshwater UK (FWUK) shares tumbled 1.25p to 13p after the public relations and marketing services firm announced pre-tax profit would be below market expectations for the full year ending 31st August 2010. The company forecasted revenue from National Health Service clients of about 25,000 pounds for the fourth quarter, against NHS sales of 225,000 pounds reported during the first half. The company was hit by the new government's decision "to abolish strategic health authorities, primary care trusts and some specialist health agencies combined with an across-the-board freeze on spending on external consultancies," the group said in a statement. London based international film group Intandem Films** (IFM) is set to post a decline in revenues when it reports its figures for the full year to 30th June 2010. However, the group said it was on course to deliver a reduction in losses on the previous year when revenues came in at 0.6 million pounds and losses topped 1.9 million pounds. Trading for the current financial year is understood to have started well with sales being concluded with UK distributors for both ‘The Kid’ and ‘Beneath Hill 60’. "The company is currently in negotiations to close the financing on four such films...,which will significantly increase revenue in the form of sales commission," chief executive Gary Smith commented. The shares rose 0.25p to 4.125p.
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companies ILX** (ILX) shares jumped 2p to 27p subsequent to the e-learning software and business training provider announcing that its International Division had won a further substantial contract in the Middle East. The contract, which is for ISO20000 training and implementation consulting for a government agency, is expected to contribute over 420,000 pounds in revenue and will be delivered during the current financial year. Ken Scott, chief executive of ILX, commented: "This is a substantial win for our International Division and reinforces the strategy of international expansion." Vitesse Media (VIS), the financial media business, announced that 2010 second quarter sales and performance have been negatively impacted by the strategic decision to move a large annual event to September. In a trading update ahead of its interim results to 31st July 2010, management confirmed that performance was in line with market expectations. In view of the persistent weak economic backdrop, Seymour Pierce slashed its forecasts for the 2011 financial year in June, bringing anticipated turnover down from 4.3 million pounds to 3.95 million pounds and pre-tax profits to 150,000 pounds from 350,000 pounds. The shares finished flat at 9p. * This 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 Intandem and ILX.
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