Wednesday's Stock Market Report from UK-Analyst: featuring Pendragon, BHP Billiton and Stagecoach
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From UK-Analyst.com: Wednesday 18th August 2010
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home Nick Clegg pledged to break Britain’s entrenched class structures and "improve people’s lives" without resorting to the handouts from the state preferred by Labour. Meanwhile, the Bank of England’s monetary policy committee voted 8-1 in favour of leaving interest rates and the amount of quantitative easing unchanged at its meeting earlier this month, with little sign that the calls for tightening policy by one member are gaining ground. Elsewhere, a senior Federal Reserve official said the negative market reactions to the central bank’s move towards an easier monetary policy last week was "unwarranted", because the US economy was not in worse shape than investors thought before the decision. At the London close the Dow Jones was down by 30.95 points at 10,374.9 and the Nasdaq was up by 0.22 points at 2,209.66. In London the FTSE 100 dropped 47.68 points to 5,302.87; the FTSE 250 fell 25.06 points to 9,886.79; the FTSE All-Share slipped 18.31 points to 2,736.46; and the FTSE AIM Index finished 0.39 points lower at 687.38. Brokers' Notes Brewin Dolphin issued a "buy" recommendation for the motorcar dealership Pendragon (PDG) with a 34p target price. The company reported a solid set of interims to 30th June 2010. The broker left its earnings forecasts unchanged but increased its sales forecast slightly, to reflect higher car sales and lower after-sales, in addition to increasing its net debt estimate as a result of higher working capital investment. Whilst Brewin remains neutral on the group's business, given its gearing and lack of asset backing, it believes that management actions are producing a solid trading base and that over the medium term, cash generation should see value transfer from debt holders to equity holders. Pendragon shares finished flat at 22.75p. Panmure Gordon upgraded its recommendation for online fashion retailer ASOS (ASC) from "hold" to buy" while retaining its 956p target price. The broker's analysis shows that 10.5% of ASOS’ web traffic comes from the US, up from 9.4% just 6 weeks ago, second only to the UK on 39.2%. This is particularly encouraging ahead of the US targeted site launch in September, which can only boost sales and, consequently, profits. Furthermore, Panmure described the firm as a "world class player" after the latest Hitwise statistics showed the group back in 2nd place in the UK online clothing category. The broker concluded that it expects the shares, backed with an attractive net cash position, to outperform peers and the market on a 12-month view. ASOS rallied 48.5p to 888.5p. John Piper on the FTSE and DJIA Singer Capital Markets initiated coverage of the closed-end investment company Marwyn Value Investors (MVI) with a "buy" recommendation and 117p target price. The broker commented that the group is now in a restricted investment phase which should lead to a gradual return of capital to shareholders. Despite the concentrated portfolio, Singer views the current discount to historic Net Asset Value (NAV) as excessive given the exit track record - since inception the fund has successfully completed four investments for the firm all of which resulted in cash/liquid assets exits through takeovers. Furthermore market consensus is for a continued strong performance from the key portfolio investments and points to very significant NAV growth over the next year. Marwyn shares finished flat at 73.5p. Evolution Securities issued a "buy" recommendation and 1,000p target price for IMI (IMI) ahead of the engineering company's interim results next week. Underpinned with the "significance of the aftermarket business", the broker expects the interims to demonstrate the changing profile within the company and contribute to the re-rating of the stock. It added that the 500 million pounds worth of acquisitions made during the period is expected to enhance the company's earning per share as well as reinforce the premium margin profile of the group. Furthermore, Evolution noted, post the firm's interim management statement back in April, peers such as Tomkins, Eaton and Parker H have all upped guidance, with IMI expected to follow. The shares finished flat at 715.5p. Blue-Chips Eurasian Natural Resources (ENRC) announced a strong financial performance for the first half of 2010. The company reported increased revenues by 80% in the six months ended 30th June 2010 to 3 billion dollars (1.9 billion pounds) compared to a year earlier, due to the addition of the Other Non-ferrous Division, higher commodity prices and improved sales volumes. Like-for-like revenue increased 67% while earnings per share were ahead by 62.8% to 70 cents (45 pence). "We remain positive about the longer term prospects for Eurasian, but there is a risk of commodity market volatility in the near term and the management of costs remains a challenge," chief executive Felix Vulis commented. ENRC shares dropped 41.5p to 926.5p. 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. BHP Billiton (BLT) shares tumbled 66p to 1,850p subsequent the miner announcing its intention to acquire Potash Corporation, the fertilizer and feed products company, at a price of 130 dollars (84 pounds) per share. The offer values the total equity of the business at approximately 40 billion dollars (26 billion pounds) on a fully-diluted basis. The acquisition will accelerate BHP Billiton's entry into the fertilizer industry and is consistent with the company's strategy of becoming a leading global miner of potash. Believing that the addition of agricultural minerals production "makes sense", Evolution Securities retained its "buy" rating and 2,012p target price. Mid-Caps British transport group Stagecoach (SGC) announced that underlying sales rose across its UK and U.S. bus and rail operations over the last three months and that it expects to meet its profit expectations for the year. The company reported like-for-like revenues at its British rail business, which includes London commuter franchise South West Trains, grew 7% in the 12 weeks to 25th July, while Virgin Rail, in which it owns a 49% stake, achieved sales growth of 18.7%. Sales at its UK bus unit rose 2% during the period, while its North American coaches operation posted a 6.9% rise in underlying revenues in the three months to the end of July, shrugging off tough economic conditions and reduced capacity. Commenting on this, the firm said the outlook for its businesses was positive despite uncertainty surrounding the effect of the change in the UK government and the sustainability and pace of economic recovery. Shore Capital believes there is scope to increase on its "below consensus earnings". However given the uncertain outlook, the broker retained its forecasts and reiterated its "buy" recommendation. Stagecoach shares travelled 2.6p further to 169.9p. Henderson (HGG) shares slipped 6.7p to 130.2p following the Anglo-Australian fund manager posting first-half profit in line with its own guidance as outflows accelerated in the second quarter. The company reported underlying profit before tax was at 48.5 million pounds in the first six months to 30th June 2010. That compared to its estimate of between 47 million pounds and 49 million pounds given last month as it announced it had pulled out of talks to take over U.S. boutique RidgeWorth from SunTrust. During the period, the firm posted net outflows of 1.3 billion pounds after posting net outflows of 600 million pounds in the first quarter. Assets under management were 56.4 billion pounds, down from 60.3 billion at the end of the first quarter. "We expect market volatility to continue in the second half, though the business trends seen so far this year remain intact," said chief executive Andrew Formica, who describe investors' confidence as "fragile." In line with Shore Capital's estimates, the broker retained its "hold" recommendation.
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download a preview of the magazine Hochschild Mining (HOC), the Latin American precious metals miner, announced pre-tax profit tripled in the first half on increased silver and gold prices. Pre-tax profit before exceptional items surged to 87.3 million dollars (56 million pounds) for the six months ended 30th June 2010 from 27.7 million dollars (17.9 million pounds), in the comparable period in 2009, as revenue jumped 33% to 306.9 million dollars (197.8 million pounds). "Precious metals prices performed strongly in the first half of 2010 and management believes that there are strong fundamentals supporting gold and silver over the long term," the company said in a statement. The shares rose 0.2p to 326.6p. Small Caps, AIM and PLUS Software Radio Technology (SRT), the technology reference design developer, announced the receipt of new orders for its AIS Class A product worth a total of 750,000 dollars (483,465 pounds). The orders are follow-on orders from existing customers and are destined for various markets around the world over the next three months. "The global AIS market continues to grow and, as evidenced by this and other orders, our products and customers are being well received," chief executive Simon Tucker commented. Shares in the company climbed 1p to 22.5p. Europa Oil & Gas (EOG) shares rose 0.75p to 12p on news that the Coal Authority has awarded it two licenses for underground coal gasification (UCG) off the east coast of England. UCG, when combined with CO2 storage in the depleted coal seams, creates a source of energy which rivals nuclear for low emissions and has lower unit costs than conventional gas-fired power stations, the group said. The estimated potential UCG energy resource in these two licence areas is 36 Exajoule or 6 billion barrels of oil equivalent.
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portfolio? Marketing and advertising agency Adventis (ATG) announced that full year pre-tax profits will be up to 50% below current market forecasts, sending its shares tumbling 3.25p to 12.25p. The group said that while its healthcare business remains fundamentally profitable, it has experienced a considerable slowdown which has continued through the summer months. Also its media planning and buying businesses have continued to be impacted by campaign delays. Activity in the property sector still remains at a low level. As a result, its cost cutting programme continues. Shares in insurance consultancy Charles Taylor (CTR) slumped 60p to 172p after it warned full-year earnings would miss earlier estimates. For the six months ended 30th June, the consultant posted a nearly flat pre-tax profit of 5.7 million pounds, as opposed to the comparable period in 2009, with revenue growth of 6% to 48.4 million pounds. The company said operating profit at its management services division, which manages mutual insurers including investment management and underwriting services, was hit by weaker performance from the UK public sector business and effects of the U.S. recession on the risk consulting business. Phytopharm (PYM) shares climbed 0.875p to 8.875p following the pharmaceutical company receiving US regulatory approval to begin the second phase clinical trial of Cogane - the drug used for the treatment of Parkinson's disease - with patient enrolment planned to begin in late 2010. The group said that, following the approval, preparatory and regulatory activities are progressing well for the study which will investigate the efficacy, safety and tolerability of Cogane administered for 28 weeks to patients with early stage Parkinson's disease. In addition, product development work has been initiated to improve the commercial and technical viability of the drug. Xaar (XAR) shares jumped 19.5p to 147p as the inkjet printing developer moved to a pre-tax profit for the first half of 2010. For the six months ended 30th June 2010, revenues rose to 23.9 million pounds, up 14% compared with the first half of 2009 against a backdrop of substantial demand for Platform 3 whilst Platform 1 sales have been stable. Product costs were still high but are now showing a marked downward trend. Pre-tax profit was 1.8 million pounds compared to a loss of 0.8 million pounds in the comparable period a year earlier. "Whilst the last two years have been testing for the management team, we are excited about the opportunities that have emerged," chairman Paul Lawler commented.
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companies Automated data capture company DRS Data & Research Services (DRS) has agreed to sell US subsidiary, Peladon Software including the UK CocXP business, to Advanced Data Spectrum. Peladon is engaged in the distribution of document management solutions and software development activity. The initial consideration will be equal to 1 dollar (0.64 pounds) plus the consolidated net asset value of Peladon Software, which is approximately 48,839 dollars (31,277 pounds). Commenting on the disposal Sir David Brown, Chairman of DRS said: "The directors have now concluded that the proposed disposal is the best route forward for DRS, as it will enable the group to focus on those parts of its business which are likely to provide better long term returns for shareholders." The shares dipped 0.5p to 17p. Metal fabricator and engineering firm Tanfield Group (TAN) reported continuing losses for the six months to 30th June 2010. Turnover in the first half was down by 6% from the comparable period a year earlier to 28.1 million pounds, resulting in a pre-tax loss of 9.8 million pounds. Demand for electric commercial vehicles continued to rise steadily during the period, with new markets outside of the UK accounting for a significant proportion of order intake. However, the ongoing global downturn in the construction sector, exacerbated by the continued absence of credit, denied the Powered Access division any opportunity for recovery. Overall, the board expects trading conditions in the second half of 2010 will be similar to the first half of the year. Tanfield shares finished 0.5p lower at 30p. Circa two years ago the company was worth near half a billion pounds. It is now worth just over 20 million.
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