The UK-Analyst Stock Market Report on Thursday 2nd September 2010: featuring Tesco, Hays and Spice
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From UK-Analyst.com: Thursday 2nd September 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 David Cameron's chief spin doctor, Andy Coulson, encouraged reporters to break the law by hacking into telephone messages while he was editing a national newspaper, according to allegations in The New York Times. Meanwhile, UK house prices fell in August for the second month in a row, marking the first back-to-back house price declines since February 2009, according to the Nationwide House Price Index. Elsewhere, official borrowing costs in the euro-zone have been left at record lows for the 16th consecutive month as the European Central Bank sticks to its cautious stance on the region's economic prospects. At the London close the Dow Jones was down by 9.69 points at 10,259.78 and the Nasdaq was 11.68 points higher at 2,188.52. In London the FTSE 100 finished 4.63 points higher at 5,371.04; the FTSE 250 climbed 80.08 points to 10,140.97; the FTSE All-Share rose 3.83 points to 2,771.3; and the FTSE AIM Index finished 4.47 points higher at 701.44. Brokers' Notes Panmure Gordon re-iterated its "sell" recommendation for the digital products technology designer ARM Holdings (ARM) with a reduced target price from 275p to 265p. While the group has significant exposure to key structural growth trends like smart-phones and tablets and is gaining share in other segments, a good portion of its business is exposed to the general semiconductor market which is likely to be impacted by a weakening macro picture. Consequently the broker is lowering its revenue estimates to reflect this. Panmure sees the stock as over-extended and vulnerable to downgrades to consensus estimates which have grown increasingly aggressive. It added that the potential for a bid for the company are extremely low given both strategic and valuation considerations. ARM shares slipped 14.6p to 359.5p. Cenkos initiated coverage for the semi-conductor manufacturer CML Microsystems (CML) with a 200p target price. The group is recovering strongly from last year's lows, spurred by strong demand for its flash memory controllers. The broker's analysis suggests the business is now positioned for double-digit sales growth and gross margins close to 70%. The company has long established customer relationships, and is seeing the dual benefit of cyclical growth in the wireless segment and much faster secular growth in storage, Cenkos added. With minimal requirement for additional operating costs or capital, the business is operationally geared as volumes pick-up, and in the medium-term there is scope for significant growth in both earnings and cash generation. CML shares rose 3p to 105.5p.
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download a preview of the magazine Evolution Securities issued a "buy" recommendation for the China-focused coal bed methane (CBM) producer Green Dragon Gas (GDG), with a 15 dollars (10 pounds) target price. This follows recent interim result for the period 30th June 2010, which showed the company making steady progress in its four divisions. Going forward, key drivers remain: the exercise of the 2nd phase of the ConocoPhillips farm-in; access to a sizeable compressed natural gas (CNG) retail network; and the achievement of meaningful revenue from upstream CBM gas sales in 2011. The shares finished flat at 6.15p. Seymour Pierce issued a "buy" recommendation for the supermarket chain Tesco (TSCO). The broker notes the Financial Times' article that the firm, along with Casino, Dairy Farm, Aeon and private equity is one of ten players interested in acquiring Carrefour's non-core Asian assets. According to the article, Carrefour has a target price of 800 million dollars (520 million pounds) to 1 billion dollars (0.65 billion pounds) for the 61 stores in Thailand, Malaysia and Singapore. Given Tesco's leading presence in both Thailand and Malaysia and depending on the price ultimately paid, Seymour believes this would be a logical move. Management pursued a similar strategy in South Korea when it acquired Homever in 2008, the broker added. The shares eased back 3.55p to 412.35p. Blue-Chips Tullow Oil (TLW), which plans to produce its first oil in Ghana later this year, will expand exploration in Kenya and Ethiopia with the acquisition of interests in six licenses from Africa Oil Corporation. The firm agreed to buy a 50% interest in Blocks 10BB, 10A, 12A and 13T in Kenya; and the South Omo Block in Ethiopia. The transaction will expand the group's East Africa assets after last month's agreement to join the U.K.'s Centric Energy Corporation in exploring Block 10BA in north-western Kenya. The 97,000 square kilometre acreage is located 500 kilometres to the east of Lake Albert and "has good evidence of a live oil system," the company said. Tullow shares dropped 51p to 1,183p.
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City Seminar AstraZeneca (AZN), the pharmaceutical company, received approval from the European Commission (EC) for Seroquel XR as an add-on treatment for patients with major depressive disorder. The drug has already been approved in 72 countries for schizophrenia and has also been widely approved for bi-polar disorders. The EC decision followed a positive recommendation by the Committee for Medicinal Products for Human Use (CHMP) in April. The company said it would seek local approvals in European markets for the 17 member states that took part in the mutual recognition procedure. AstraZeneca shares finished 8.5p lower at 3,276.5p despite the positive news. Mid-Caps McBride (MCB) shares rallied 15.9p to 156.9p after the supplier of household and personal care products posted a sharp rise in profits in the year to 30th June as shoppers continued seeking the cheapest items. The maker of washing-up liquid, shaving foam and many other products saw pre-tax profits increase by 33% from a year earlier to 29.6 million pounds on revenues of 812.2 million pounds, up by 2%. The group, however, warned that it is experiencing an increasing trend in raw material costs in a challenging retail market but added that the group is better placed than previously to manage this. Hays (HAS), the recruitment agency, announced a recovery in private sector hiring was fuelling a broad improvement in trading as it reported an 80% decline in annual profit. For the year ended 30th June 2010, pre-tax profit was 29.7 million pounds, down from 151 million pounds a year earlier, on net fees that fell 17% to 557.7 million pounds. Trading was blighted by a tough first half and a 30 million pounds fine imposed by the Office of Fair Trading for anti-competitive behaviour in the recruitment of construction industry workers. Commenting on this, the firm said the outlook across 90% of its markets continued to improve, although it added there was weakness in the recruitment of construction and back office staff in the UK public sector, where deep spending cuts loom. Hays shares climbed 3.6p to 97.6p.
Brand new tip out now on WatsHot.com Energy efficiency specialist Eaga (EAGA) achieved strong results despite a tough year during which there were delays in some projects. For the year ended 31st May 2010, the company posted a 7.5% rise in adjusted pre-tax profits to 51 million pounds from a year earlier as revenue increased by 3.1% to 762.2 million pounds. Commenting on this, the group said the action of the new government has slowed down the procurement process for a number of large government outsourcing programmes, but added that it expects the firm's performance to pick up in the second half of the financial year. Eaga shares finished flat at 104p. Go-Ahead (GOG) shares zoomed 77p ahead to 1,165p despite the British transport group posting a 24% fall in full-year profit. For the year ended 3rd July, the company reported a pre-tax profit of 88.7 million pounds on revenues of 2.2 billion pounds, up by 1% a year earlier. The firm's rail business saw ticket sales drop 1% to 1.5 billion pounds but its bus unit delivered increased revenues by 7.7% to 0.6 billion pounds, even though its London bus business suffering after renewing contracts on poorer terms. "We continue to be cautious on the near term prospects for the UK economy and the outlook for the next financial year remains difficult to predict, including any impact from the government's comprehensive spending review expected to be announced in October 2010," the company commented. Small Caps, AIM and PLUS Synchronica (SYNC), the next-generation mobile messaging solution developer, said it is a step closer to acquiring the mobile software company Iseemedia. It was announced that 66% of the Iseemedia shares have been tendered to the group's take-over bid for all the issued shares. Consequently, Synchronica has extended the offer deadline to 14th September 2010 and has committed to take up and pay for all shares tendered by that date. "This acquisition is a key step towards our goal of achieving a market-leading position in the fast-growing emerging markets," the firm added. Synchronica shares finished at 20.5p. Firestone Diamonds (FDI) reached its target earthmoving and production plant capacity ahead of schedule and recovered a high quality diamond at its BK11 mine in Botswana, raising its expectations for the average value of output at the mine. In a trading statement, the miner said it would "comfortably exceed" the target production of 1.5 million tonnes per annum at it BK11 production plant once the phase 2 commissioning was completed in the fourth quarter of 2010. Firestone, which had agreed to buy rival Kopane Diamond Developments for 71 million dollars (46 million pounds) to get its hands on Kopane's Liqhobong kimberlite project in July, said plans developed in relation to the mine were in advanced stage. However, the company added that the plant it was building for Debswana Diamond Corporation at a Botswana mine would be delayed to allow Debswana to focus on certain "higher priority projects." The shares rallied 3.5p to 26.75p.
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portfolio? Software Radio Technology (SRT) shares jumped 4p to 24.75p as the maritime-focused identification and tracking technologies firm re-negotiated a distribution deal in China following re-evaluation of the market concluded that a greater opportunity now exists. Consequently, the company has freed itself from an exclusive one-party deal and has signed a distributor agreement with a new customer in China whose sales channels access new segments of the market. Separately, the firm reported increased first quarter revenue by 147% to 1.82 million pounds on the same period last year, with net profit before tax coming in at 448,000 pounds. Motive Television* (MTV) shares climbed 0.08p to 0.6p subsequent to the broadcaster winning a new live sports production contract with Irish national commercial television broadcaster TV3 for 1.1 million Euros (0.92 million pounds). As part of the contract, the company will co-produce 62 UEFA Champions League and UEFA Europa League matches with Asgard Media, a television production company based in Ireland. 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. Spice Holdings (SPI) shares ascended 3.75p to 67p on news that the utility support services firm is in advanced talks regarding a possible takeover bid for the company. This comes after the buy-out group Cinven increased its cash offer for the business from 56 pence per share to 70 pence per share, valuing the firm at around 246.5 million pounds. In addition, Spice shareholders will be entitled to a final dividend payment of 1.22 pence per share if the deal goes through. "Although the board of Spice believes that the company has a strong future as an independent business... due to the cash nature and premium of the potential offer, it is in shareholders' interests to facilitate further discussions with Cinven," the company said in a statement. PLUS quoted catering company Bright Futures (BFGP) has taken over Yes Dining for a total consideration of just less than 237,000 pounds. Yes Dining is an established contract catering company with 230 employees and contracts with local authorities in London, the South East and the South West of England, as well as clients in other market sectors. Tjalke Boersma, Chief Executive of Bright Futures, said: "We believe that Yes Dining will benefit greatly from being brought into the Bright Futures Group and our ever growing support network." The shares finished at 0.175p.
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