From UK-Analyst.com: Thursday 19th August 2010

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Lord Brittan, the former EU trade commissioner, has been appointed as a trade adviser to the coalition. The appointment comes amid a vacuum which has existed within the government for the last three months as David Cameron sought to hire a high-profile figure to carry out the separate role of trade minister. Elsewhere, the flow of lending to business slowed again in June, according to the latest report on credit trends from the Bank of England, underscoring its concerns about the impact on the nation’s ability to recover from recession. Meanwhile, public borrowing rose less than expected in July, boosted by a surge in corporation tax receipts, raising hopes that Britain’s finances can be brought under control as the government prepares its crucial comprehensive spending review. At the London close the Dow Jones was down by 143.5 points at 10,272.04 and the Nasdaq was down by 31.8 points at 2,183.9.

In London the FTSE 100 tumbled 91.58 points to 5,211.29; the FTSE 250 dropped 51.71 points to 9,835.08; the FTSE All-Share fell 39.2 points to 2,693.6; and the FTSE AIM Index rose 1.17 points to 689.01.

Brokers' Notes

GE&CR issued a "buy" recommendation for Ambrian Capital* (AMBR) with a target price of 44p following the investment bank's recent acquisition of Masefield Bio-Fuels. The research house commented on the group's good track record of delivering organic growth and regards it as an expert within its specialist sectors. Whilst the Corporate Finance and Equities business is highly geared to a possible pick up in natural resources deals on the equity markets, the Commodities part of the business has the opportunity to grow through the recent diversification into Crude Oil and Bio fuels, GE&CR added. In addition the company has plans to increase its trading capacity on the London Metal Exchange by obtaining a 3rd party liquidity provider, and has increased its ability to provide physical commodities to China by establishing a subsidiary in Shanghai. Ambrian shares finished 1p lower at 21.25p.

Evolution Securities downgraded its recommendation for dairy companies Robert Wiseman Dairies (RWD) and Dairy Crest (DCG) leaving its target price for Wiseman unchanged at 530p but cutting it for Diary Crest from 425p to 400p. The broker continues to think both businesses are quality companies with high calibre management. However, in the near term it thinks neither will be immune from rising input cost pressures and the increasingly challenging retail environment in the UK. The retailers’ latest milk price war creates a real risk of a gross margin squeeze for the milk processors. After relatively resilient share price performances over the last three months Evolution thinks both firms’ valuations look up with events, and investors looking to buy should wait for more attractive entry points. Wiseman and Dairy Crest shares fell 9.8p to 497.7p and 8.8p to 374.7p, respectively.

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Panmure Gordon reiterated its "sell" recommendation for the mining group Aquarius Platinum (AQP) with a target price of 271p. The broker commented that the company must be hoping that the 2011 financial year marks the end of a string of rather bad luck for the business - from subsidence at Everest, to the teething problems at Blue Ridge and then multiple fatalities at Marikana. Certainly this should mark the low point from a production point of view, Panmure added, however, margins are under pressure from falling platinum group metal prices and rising costs and it believes this will continue short term. Aquarius shares drifted 5.4p lower to 264.1p.

Fox-Davies Capital maintained its "buy" recommendation for Hochschild (HOC), with an increased target price from 368p to 393p, following the release of the mining company's interim results for the six months ended 30th June 2010. The group reported an attributable profit after tax of 38.9 million dollars (24.9 million pound) on revenues of 306.8 million dollars (196 million pounds). This compares to the broker's forecast of 22 million dollars (14.1 million pounds) and an actual reported attributable profit after exceptional items of 29.2 million dollars (18.7 million pounds). This was driven by successful drilling explorations which have resulted in the resource life of mine increasing by 11% to 7.9 years with expectations that further increases will be forthcoming at the end of the year. Furthermore, the company maker pipeline has been expanded to six projects, the broker added. The shares dipped 2.6p to 324p.

Blue-Chips

AMEC (AMEC), the engineering and project management company, has been awarded a contract in excess of 60 million pounds by EDF Energy to extend a gas storage facility in Cheshire. The contract, at the Hill Top Farm facility at Warmingham, will see the firm design, install and commission the filtration and compression facilities, after-cooling, de-hydration, metering and utility equipment. The work will enable EDF Energy to significantly increase its gas reserves, and therefore contribute to the security of the UK's gas supplies, AMEC added. The shares dropped 13p to 877.5p.

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Essar Energy (ESSR) announced strong revenue growth for the half year ended 30th June 2010. The group reported revenue of 4.8 billion dollars (3.1 billion pounds), up by 66% in the comparable period a year earlier. This was primarily due greater refinery sales volumes and a rise in refinery sales prices. In spite of this, EBITDA was down by 25% to 320 million dollars (205 million pounds) due to increased crude costs and lower retail profits as oil prices rose during the period. Separately, vice chairman Prashant Ruia told Reuters’ reporters that Essar remained in talks with Royal Dutch Shell about a possible acquisition of refineries in the UK and Germany. However, Ruia added that the firm’s focus was on India. The shares finished 1.8p lower at 406.8p.

Property company Hammerson (HMSO) agreed to sell 51% of its interest in O'Parinor shopping centre, France, to The National Pension Service of Korea (NPS). In addition, it has also been agreed that NPS may purchase a further 24% interest in autumn 2011. Hammerson will receive 217 million Euros (178 million Pounds) for its 51% stake and 106 million Euros (87 million pounds) if the further 24% interest is sold. Commenting on this, Hammerson said that the disposal will allow it to "realise value, and release capital for investment opportunities in the UK and France which offer superior returns." Hammerson shares moved 3.5p lower to 360.2p.

Mid-Caps

Wellstream Holdings (WSM) shares climbed 38p to 545p despite the British manufacturer announcing a 41% fall in pre-tax profits for first half of 2010 as new contract awards in Brazil helped boost its backlog. The company, whose flexible pipes are used by oil companies in deep water, posted pre-tax profit of 10.6 million pounds while revenue backlog grew to 246 million pounds at the end of June, up 46% from the end of 2009. "This is an encouraging development and our expectation therefore remains that the result in the second half of the year will be somewhat ahead of that achieved in the first half of the year," commented chief executive Alasdair MacDonald. In a separate announcement, Wellstream announced it won a major installation contract with Brazilian company OGX Petrole e Gas. Panmure Gordon said that the manufacturer appears to be "turning the corner" and starting to see a recovery in its order book. Nevertheless, the broker wants to see the order book increase further before changing its recommendation from "sell" at its current target price of 450p.

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Engineering group Balfour Beatty (BBY) announced that Gammon Construction, the infrastructure contractor in Hong Kong, in which Balfour Beatty has a 50% shareholding, has been awarded a 2.883 billion Hong Kong dollars (238 million pound) rail infrastructure contract, in joint venture with Leighton Asia, by MTR Corporation. The contract, for which Gammon has a 50% share, is in the West Kowloon district and is part of the Hong Kong section of the Guangzhon-Shenzhen-Hong Kong Express Rail Link, which forms part of China's strategic national express rail network. Shares in the company slipped 5.8p to 254.7p despite the good news.

Dimension Data Holdings (DDT), the IT services and solutions group, recorded a strong trading performance for the three month period to 30th June 2010, extending the return to growth seen in second quarter of 2010. In an interim management statement, the firm reported that turnover in constant currency increased year on year by approximately 22% compared to third quarter of 2009, driving by a strong performance from the System Integration (SI) business. Trading in Internet Solutions and Express Data was satisfactory, while Plessey was slightly loss making for the quarter impacted by weak order volumes in the African business. The company remains confident that its target of single digit constant currency revenue growth for the full year is achievable. DDT shares finished 0.3p lower at 120p.

Small Caps, AIM and PLUS

Sunrise Resources (SRES) shares surged 0.18p to 0.63p on news that the mining company has completed a programme of sampling for barite from underground mine workings at the past-producing Derryginagh barite mine in Ireland where it was recently awarded an exploration licence. Barite is used as a weighting agent in oil industry drilling muds and as a higher value industrial filler in, for example, paints, plastics, brake linings and acoustic panels. A programme of metallurgical test work will start next week to evaluate low cost gravity concentration of the barite to saleable specification.

Romag Holdings (ROM) shares plunged 15p to 40.5p after the specialist transparent composites manufacturer announced that the disruption caused by the death of chief executive Lyn Miles in June, which was exacerbated by delays in the supply to the company of certain key materials, has resulted in a disappointing trading performance. Furthermore, the lack of credit insurance and funding available to certain customers has delayed sales to those customers until they have sufficient funds to pay for the goods they have ordered. The directors expect the impact of these factors to lead the group to report a loss for the current financial year.

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Scotgold Resources (SGZ) shares dropped 0.875p to 2.875p after the mining group's plan to start mining for gold in Scotland was rejected by the local authority because of potential damage to the environment. The board of the Loch Lomond and The Trossachs National Parks, a protected area between Glasgow and the Highlands, said in statement that the proposal by Scotgold failed to win approval because of the “visual impact of the waste management facility.” The firm added that it is likely to appeal to the Scottish Ministers.

Ceramic Fuel Cells (CFU), the developer of fuel cell technology, announced it has conditionally raised 10 million pounds in the UK by placing 59.5 million new shares and subscribing 35.7 million shares to an unnamed investor. The Melbourne-based company added it also planned to offer existing shareholders the chance to participate in a further rights issue in Australia and New Zealand, through which it hopes to raise another 12.4 million pounds. "The funds will be used to take the company to the next stage of its commercial development, including scaling up production to meet expected future demand including working capital and manufacturing investment," the group commented. In a separate announcement, for the 12-month ended 30th June 2010, the firm reduced its net loss from 42.2 million Australian dollars (24.3 million pounds) a year earlier to 19.7 million Australian dollars (11.3 million pounds) as revenue increased by 21% to 2 million Australian dollars (1.2 million pounds). Ceramic shares finished 0.75p lower at 11.25p.

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Norseman Gold** (NGL) announced the suspension of underground operations at the OK Decline, following the fatality at the Decline on 5th August 2010. The group is working with relevant authorities in conducting an investigation into how the incident occurred. The operations of the Bullen and Harlequin Declines have not been unduly affected by the incident, the miner added. Shares in the gold miner dipped 0.5p to 40.5p.

Adnams (ADB), the Suffolk-based brewing and hotel management company, announced "disappointing" results for the six month to 30th June 2010 on the back of "very tough conditions in the UK beer market." Like its beer, according to some, turnover was flat at 23.1 million pounds with profits slumping by 27% to 641,000 pound on lowered volumes. “The economy is in a highly uncertain state. We know that cutbacks are happening and will continue, we know that VAT will increase. We do not know whether this will presage a revival or a renewed decline,” chairman Jonathan Adnams concluded.

* The company is a corporate client of Rivington Street Holdings, the ultimate owner of this website. Ambrian Capital owns shares in Rivington Street Holdings. ** The T1ps Smaller Companies Gold Fund - which is advised by T1ps Investment Management, a subsidiary of Rivington Street Holdings, owns shares in Norseman Gold.