Friday's Stock Market Report from UK-Analyst: featuring Balfour Beatty, Melrose and the Friday Competition
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From UK-Analyst.com: Friday 27th August 2010
From Tom Winnifrith the founder of Red Hot Penny Shares
– a man who knows a hot share tip – plus
infamous short seller Evil Knievil – www.t1ps.com The UK-Analyst Friday Competition is back. For your chance to win a copy of the 2010 Master Investor DVD (RRP GBP12.99) simply identify the 5 year share price performance of the mystery FTSE 100 company below. To enter e-mail your entry to richard.gill@t1ps.com by 8am on Tuesday morning. The Master Investor 2010 DVD features the highlights of the UK's top investment show, including informative and incisive speeches from master investors such as "Britain's Buffett" Nigel Wray, top fund manager Mark Slater and secret millionaire Nick Leslau.
Ed Balls warned that a "hurricane is about to hit" Britain's economy, suggesting the coalition's plans to slash the deficit risked pitching the country into a double-dip recession. Meanwhile, the UK economy grew slightly faster than initially thought in the second quarter, expanding by 1.2% rather than the 1.1% first estimated. That is the fastest quarterly growth the UK has seen since 1999, but comes after the economy contracted by more than 6% during the recession. Elsewhere, fears of a faltering US economy were realised when growth for the second quarter was revised down to an annual rate of 1.6% from an initial estimate of 2.4%. The weaker output reflected a wider trade gap and weaker inventory investment. At the London close the Dow Jones was up by 116.33 points at 10,102.14 and the Nasdaq was up by 19.14 points at 2,137.83. In London the FTSE 100 climbed 45.72 points to 5,201.56; the FTSE 250 jumped 101.96 points to 9,779.90; the FTSE All-Share rose 27.34 points to 2,687.69; and the FTSE AIM Index finished 0.88 points ahead at 685.86. Brokers' Notes GE&CR issued a "buy" recommendation for the PLUS listed gold company Ascot Mining* (ASMP) with a 62p target price. This follows the recent trading statement released by the group confirming the near-term completion of the upgrade to its Chassoul gold mine and mill in Costa Rica, which is expected to triple capacity to 150 tonnes of ore per day. The group will be developing two additional projects - Tres Hermanos and El Recio projects - in the next few months which are expected to propel the business towards financial independence and material cash generation. The research house added that this, along with the good news from the underground stope preparation and further exploration work, should go a long way to mitigating the setback suffered at the La Toyota project. Ascot shares finished at 15p. Arbuthnot maintained its "buy" recommendation for the shipping services group Clarkson (CKN) but cut its target price from 1,130p to 1,050p in the wake of the recent interim results. The broker remained positive on the shipbrokers; it views them as lower risk plays on the global economy and global trade, with strong balance sheets and asset-light cash generative business models that are well diversified compared with ship owners. Macroeconomic uncertainty remains, the broker added, and it believes the risks to broking profit forecasts are now balanced rather than biased on the upside. In the case of Clarkson, it feels inclined to add extra caution due to the poor performance of the financial division despite the aggressive cut to its estimates there. The shares rose 8p to 945p. Dedicated spread betting tips and analysis Evolution Securities issued a "buy" recommendation on the project management and services company AMEC (AMEC) with a target price of 1,000p. The firm's interims showed revenue growth in all divisions and a modest uplift in margins which is expected to accelerate through to the second half of 2010 due to the seasonal bias of profits. Management added that it is confident in beating the 8.5% EBITDA margin target rate for the 2010 financial year. Whilst the underlying business is on a growth track, the broker wrote, the acquisition strategy is not really impacting the cash pile which remains a drag on performance. AMEC shares rose 9.5p to 901p. Brewin Dolphin downgraded its recommendation for the fluid control company Spirax-Sarco Engineering (SPX) from "buy" to "add" at the same time as increasing its target price from 1,790p to 1,800p. The group reported a strong set of interim results this week with sales up by 10%, from the comparable period a year earlier, to 277 million pounds and underlying pre-tax profit rising by 44% to 54.9 million pounds. The broker believes the business is emerging from the downturn in excellent shape and expects the firm to retain its sector premium. Furthermore, return on capital employed (ROCE) came in at just less than 40% in the first half and Brewin anticipates this improving further as recent investments begin to contribute. Spirax shares climbed 15p to 1,580p. Blue-Chips Mosaic and Agrium, the partners of PotashCorp in Canada's fertiliser cartel, have launched a campaign defending the industry's pricing and marketing arrangements in a move that could impede BHP Billiton's (BLT) 39 billion dollars (25 billion pounds) takeover bid for PotashCorp. The financial times reported on BHP's plans to use infrastructure such as port and rail facilities that belong to Canpotex, the cartel that comprises PotashCorp, US-based Mosaic and Agrium of Canada. But the Anglo-Australian company has insisted it plans to run PotashCorp's mines at full capacity if its bid triumphs, a move that would torpedo the industry's current arrangement of matching output with supply to maintain potash prices at high levels. The chief executives of Mosaic and Agrium have lamented BHP Billiton's plans, providing PotashCorp with ammunition to lobby Canadian regulators and politicians to block the hostile takeover. BHP shares shed 1p to 1,801.5p.
FTSE 100 trading calls by text
message Mid-Caps Melrose (MRO) shares rallied 22p to 243.6p as the British manufacturing firm posted a 47.4% rise in half yearly adjusted pre-tax profit. For the six months ended 30th June 2010, adjusted pre-tax profit rose to 78.1 million pounds from 53 million pounds a year ago despite revenues falling 1.3% to 675.7 million pounds. The improvement in profit was driven by a further increase in the group headline operating margin to 13.6%, up 3.4 percentage points on the same period last year. "Although it remains difficult to gauge the eventual impact of government debt reduction measures, particularly in Western economies, we are confident that our businesses will see further progress in the remainder of this year and into 2011," chairman Christopher Miller commented. "The simple reality is that Melrose has proven that it can generate sustainable premium margins and this has not even begun to be reflected in the rating," Evolution Securities said. The broker maintained its "buy" recommendation and 300p target price. The Davis Service (DVSG) shares rose 7.2p to 373p on reports that the group, which hires out work overalls and provides laundry services for hospitals, hotels and restaurants, has continued to make good progress during the period as margins rose in Norway and Sweden. For the six months ended 30th June 2010, adjusted pre-tax profit was at 41 million pounds, up from 40.2 million pounds a year ago. At the same time, revenue also climbed up by 1% to 488.5 million pounds. Christopher Kemball, Chairman of Davis Service Group, commented: ''We see current trading conditions continuing into the second half of the year giving the board confidence in the outturn for the full year." Encouraged by this, Seymour Pierce retained its "buy" stance and 450p target price.
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download a preview of the magazine British IT firm Computacenter's (CCC) first-half profit increased by 16.6%, helped by a strong rebound in infrastructure spend, together with steady growth in services, as well as a continued focus on cost control. The group, which sold its trade distribution arm last year, reported adjusted pre-tax profit of 21.3 million pounds in the six months to end-June on revenue of 1.29 billion pounds, up 5.4% a year earlier. The company said a stronger industrial sector in Germany and financial sector in the UK would offset curbs in public-sector spending in the second half. "We are confident that we are on track to meet our expectations for the year as a whole," the firm concluded. Delivering better than expected interim results, the broker retained its "buy" recommendation while increasing its target price by 2p to 400p. Computacenter shares advanced 4.6p to 280.8p. Balfour Beatty (BBY) shares climbed 4.2p to 239.3p on news the infrastructure engineering group has been appointed as preferred bidder by Hertfordshire County Council for the 80 million pounds schools scheme in Stevenage. The scheme, which is expected to start on site in February 2011, involves the design, construction and provision of facilities management for two mainstream secondary schools and a special educational needs school. The group will invest equity of 5 million pounds into the 25-year concession to build and maintain these two schools. Small Caps, AIM and PLUS Kubera Cross-Border Fund (KUBC) shares jumped 0.14p to 0.94p after the closed-end investment company announced that Atos Origin, an international IT services company, has acquired Venture Infotek, an investee company of the group. The fund will receive net distributions of 40 cents (26 pence) per share based on just less than 110 million shares outstanding, with distributions equal to 28 cents (18 pence) per share received immediately, which will be distributed to shareholders. Property Recycling Group (PROP) shares rallied 1.75p to 10.5p as the brownfield sites developer swung to a pre-tax profit. For the six months to June, the group reported a pre-tax profit of 178,637 pounds compared to a pre-tax loss of 33,745 pounds a year earlier on increased revenue of 666,215 pounds, up by 53%. While rental income fell as a result of the overall economic downturn, the firm's approach of securing option fees generated 300,000 pounds. There were no property realisations in either period. Chairman Paul Rackham said, "We expect that it is going to be some time before demand for development sites returns to normal activity levels." 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. Triple Plate Junction (TPJ) shares tumbled 0.13p to 1.23p as the South East Asia-focused gold explorer warned that it would need to raise a "substantial amount of new funding in relation to the company's market value to fund its activities through to the spring of 2011." The company said provided that funding becomes available, then, overall, the newly reconstituted board was optimistic about the opportunities that lie ahead with "exceptional exploration opportunities in Papua New Guinea." Separately, the firm announced that pre-tax losses narrowed to 0.8 million pounds from 19.48 million pounds a year earlier which included a 19 million pounds impairment charge. Revenue from provision of office management services fell by 20% to 97 million pounds. Frontera Resources (FRR) shares slipped 0.25p to 3.25p following the oil and gas exploration and production company announcing that its existing working capital will not be sufficient to meet the cash requirements to fund the company's planned operating expenses and capital expenditures through to the end of 2010. The group warned that failure to generate sufficient operating cash flows, raise additional capital or further reduce spending will have a material adverse effect on the company. It plans to continue to reduce costs and raise additional financing to meet its cash needs but added that "there can be no assurance that the company will be successful in obtaining additional sources of financing." Beowulf Mining (BEM) shares fell 0.5p to 5.75p subsequent to the mining company announcing widening pre-tax losses. For the six months ended 30th June 2010, the group posted a pre-tax loss of 221,968 pounds compared to 190,547 pounds a year earlier on increased administrative expenses. Executive chairman Clive Sinclair-Poulton commented: "The first half of 2010 has been another active period for the company and we look forward to reporting the remaining results of our Kallak drilling programme, which is currently nearing completion, in due course."
Gold set to head higher - will it be $1500 or
$3,000 PLUS-quoted financial services group Webb Capital** (WCAP) has completed the acquisition of Chatsford Corporate Finance, the corporate and investment advisory firm focusing on small to medium sized companies, for 64,000 pounds. As part of the transaction Chatsford has agreed new consultancy arrangements and its existing relationship with Lennox Partners will continue. The shares advanced to 21.5p. Another PLUS-quoted company reporting is the business to business music and video rights provider One Media Publishing*** (OMPP). The group has acquired the rights in perpetuity for both digital and physical record use worldwide, to a catalogue of music from the Machet Catalogue of music rights for 18,000 dollars (11,673 pounds). The catalogue that comprises mainly of the established "Gangster Rappers" adds a new dimension to its existing catalogue of rights. The acquisition of over 500 tracks of music includes recordings by Nate dogg, King Curtis and Blink 182. The shares finished at 2.05p. The Week AheadWe expect a busy week on the news-flow front from the small-caps next week. Pension consultant Mattioli Woods (MTW) and mineral exploration company Pan African Resources (PAF) are due to provide the market on final results next week with self-storage company Safestore Holdings (SAFE) due to update the market on trading on Tuesday. Later on in the week investors will be looking for a positive update from textile rental and facilities management group Johnson (JSG), share in which have, more or less, gone down since the start of calendar 2010 but are expected to benefit from a restructuring of the business that is currently underway.
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companies Amongst the larger companies, Eaga (EAGA) will be providing finals on Thursday, with shares expected to fall reflecting increased levels of uncertainty surrounding UK public sector spending. What investors will be looking for is how the steps to cut government borrowing, such as higher taxes and public spending cuts, will hit consumer demand at electrical and computing retailer DSG International (DSGI) and household and personal care products distributer McBride (MCB). Another blue-chip firm reporting next week is London and South East commuter services operator The Go-Ahead Group (GOG), shares in which are expected to fall on decreased London bus profitability, a flatter rail profit outlook and greater interest costs. * Ascot Mining is a corporate client of Rivington Street Holdings, the ultimate owner of this website; the T1ps Smaller Companies Gold Fund and Worship Street Investments (both of which are advised by T1ps Investment Management, a subsidiary of RSH) both own shares in Ascot Mining. ** The T1ps Smaller Companies EIS Fund, which is advised by T1ps Investment Management, owns shares in Webb Capital. *** One Media is a corporate client of Rivington Street Holdings, the ultimate owner of this website; Worship Street Investments owns shares in One Media.
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