Friday's Stock Market Report from UK-Analyst: featuring BP, RBS and the Friday competition
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From UK-Analyst.com: Friday 3rd 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 Extra buses and river services and a series of guided cycle rides are due to operate in London on Monday and Tuesday as the capital prepares to limit the impact of the first system-wide London Underground strike in 15 months. Meanwhile, UK service sector activity grew at the weakest pace in 16 months in August, heightening fears that the economy is beginning to stall. Elsewhere, the US shed 54,000 jobs in August as the government dismissed more temporary census workers, but a healthy rise in private sector employment offered hope that the economy could fend off a second recession. At the London close the Dow Jones was up by 66.53 points at 10,386.63 and the Nasdaq was 18.57 points higher at 2,218.58. In London the FTSE 100 rose 57.11 points to 5,428.15; the FTSE 250 climbed 63.14 points to 10,204.11; the FTSE All-Share advanced 24.1 points to 2,797.01; and the FTSE AIM Index finished 6.71 points ahead at 708.70. 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 Monday 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 and secret millionaire Nick Leslau.
Brokers' Notes Brewin Dolphin retained its “buy" recommendation and 80p target price for the electronic manufacturing services supplier Stadium (SDM). The group reported on a strong first half of the year driven by new contracts and a broad based recovery from existing customers. In addition, new contracts were won in key sectors, such as greentech, security, transport, medical and LED, which drove further growth despite the uncertain wider economic outlook. The quality of earnings have improved greatly following the disposal of the Plastics division and, coupled with the significantly improved balance sheet, the group is in a strong position. With strong cash balances and a two million pounds freehold property to sell, the focus is now on identifying further organic and acquisitive opportunities, the broker believes. Stadium shares climbed 3p to 63p. Evolution Securities reiterated its “buy" recommendation and 210p target price for Africa Aura Mining* (AAAM). The broker commented on the progress the group has made over the past six months which it believes is not adequately reflected in the shares. Aura has been busy over the past three months pushing forward with the exploration of both of its key projects. It has also started investigating the potential of splitting the business in two which Evolution thinks will help the firm recognise the substantial value inherent in both the gold and iron sides of the business. The broker added that it sees upside potential beyond the current target price but awaits the results of the scoping study at New Liberty before making any further changes. The shares rose 2p to 79p.
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download a preview of the magazine Seymour Pierce maintained its “hold" recommendation for the supermarket chain WM Morrison (MRW) ahead of its first half results next week. The broker expects the tone of the interims to be ‘evolutionary' rather than ‘revolutionary' as the business is already performing fine. Nevertheless, Seymour believes the firm has limited long term growth opportunities relative to its peers, having failed to push the same growth drivers others have, such as offering online shopping. With the shares already having performed ahead of next week's update, the broker added, there is a danger that this update will fail to impress. Morrison shares finished 1.7p lower at 289.3p. Panmure Gordon reiterated its “buy" recommendation and 800p target price for the animal breeding-focused biotechnology company Genus (GNS) ahead of full year results next week. In early July, the firm confirmed that trading for the year to June 2010 was in line with expectations, implying an improvement in trading during the second half of the year. Since then pork prices have held up well but feed costs have risen which may dampen farmer's expansion plans; still, the rise is nowhere near the levels which caused such pain to farmers in 2008. Panmure added that the underlying fundamentals of the group remain “very positive" as it forecasts a return to double-digit earnings per share ratio growth next year. Genus shares eased back 1.5p to 719p. Blue-Chips BP (BP.) announced that the cost of dealing with its oil spill in the Gulf of Mexico has risen to 8 billion dollars (5 billion pounds) and that it was a fortnight away from sealing the well for good. The oil giant also indicated that there had been no major uptick in the amount of money being handed out to those affected by the spill, under the new independent compensation system, established in a deal with the White House. BP shares flowed 9.1p higher to 401.7p.
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City Seminar HSBC (HSBA) has given the clearest warning yet that British banks would move their headquarters abroad if the UK government-appointed Commission on Banking were to decide that big groups should be broken up. Stuart Gulliver, the group's investment banking head and the favourite to success Michael Geoghegan as chief executive, said he was “genuinely concerned" that the commission would recommend that universal banks, such as HSBC, should split their high street banking from their riskier investment banking activities. The comments follow more veiled suggestions from Barclays and Standard Chartered last month that they could relocate to Asia or the US if they were threatened with break-up. HSBC shares rose 2.4p to 654.4p. Royal Bank of Scotland (RBS) is axing another 3,500 jobs, taking to almost 27,000 the number of staff cuts since Stephen Hester took over as chief executive of the troubled UK bank less than two years ago. The cuts are part of a process to rationalise the RBS's back-office operations, halving to 10 the number of its key processing centres. About a third of the cuts are understood to be related to the 1.65 billion pounds sale of 318 branches to Santander last month. Although branch staff are being transferred as part of the sale, back-office resources are not. Commenting on this, Mr Hester said that this is a crucial part to turn the bank around and trim it back from the bloated scale he inherited from his expansive predecessor Sir Fred Goodwin. RBS moved up 0.47p to 46.62p. Mid-Caps Soco International (SIA) shares stumbled 40p to 436.6p as the oil explorer prepared to plug and abandon the wildcat exploration well Nganga 1 in Congo after encountering water bearing sands. The well was drilled to a measured depth of 2,175 metres. Preparations are now being made to move to the Kinganga Nyanya well on Prospect D after the first well drilled there confirmed the existence of a working hydrocarbon system.
Brand new tip out now on WatsHot.com Small Caps, AIM and PLUS Creat Resources Holdings (CRHL) shares soared 0.87p to 2.5p on news Galaxy Resources, the mining and chemical company that Creat has a 19.99% stake in, has received a 14 million dollars (9 million pounds) bridging loan to support the development of a lithium carbonate processions plant being built in Jiangsu Province, China. The loan has been arranged as short-term finance until Galaxy receives the planned 105 million dollars (68 million pounds) project finance facility. Creat's Chief Operations Officer, Rex Chow, said: "Our partnership with Galaxy provides a strong underpinning to our reshaped strategy of expanding our international presence and diversifying our resource base and range of activities". Coburg Group (CGG) shares jumped 0.25p to 1.5p as the coffee beans distributer swung to a full year profit after several years of losses. For the year ended 30th April 2010, pre-tax profit was at 106,000 pounds, compared to a 123,000 pounds loss a year earlier, despite sales falling by 11% to 3.1 million pounds. This bounce back was driven by a reduction in distribution costs and administrative expenses. Separately, the firm proposed to re-organise the capital structure of the company to facilitate its ability to issue new shares for cash. Commenting on this, Konrad Legg said: “In spite of the continuing rises in raw green coffee prices, the directors expect the company to remain profitable in the current year."
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gain from higher gold prices British sport equipment manufacturer Tandem Group (TND) expects first-half pre-tax profit to be greater than last year as results for the year were likely to exceed market estimates on higher demand for its bicycles. In a trading update, the firm reported that turnover for the six months to 31st July was flat at around 19 million pounds compared to the comparable period a year earlier. Revenue growth at its Dawes cycle units and the sports leisure and toys business was offset by lower turnover from a bicycle promotional contract with a national retailer. “Despite the fears that Toy Story merchandise would saturate the market..., revenue from our licensed properties, including Ben 10 wheeled toys, is likely to exceed our earlier expectation," the firm added. Tandem shares pedelled 12p ahead to 129p. Oak Holdings (OAH) shares branched 0.75p higher to 5.5p after the leisure business operator and developer won planning approval for the 350 million pounds YES! Project in the Rother Valley Park, South Yorkshire. Following confirmation by the Government Office that Rotherham Borough Council was authorised to determine the application, the council's planning board agreed to grant planning consent. YES! Project has been hailed as the largest undercover, leisure-based, resort and convention destinations in Europe. One of the biggest shareholders in Spice (SPI) has signalled it would hang on for a better takeover offer even though the board of the utility services company said it was minded to back a 364 million pounds approach from Cinven, the private equity group. Aviva Investors, a top-10 shareholder, said that Cinven, one on Europe's biggest buy-out houses, would not be paying “much premium" for control of Spice were its sweetened 70p per share cash proposal successful. Spice shares finished 0.5p lower at 66.5p. In response to the recent share price movement and media speculation, Churchill Mining (CHL), the Indonesian-focused coal mining company, announced that it has held discussions with third parties regarding East Kutai Coal Project, but no firm offer has been agreed. Furthermore, the company also announced that the strategic review to evaluate the various options for financing the development of the Project is ongoing. Churchill shares jumped 7.5p to 114p. 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. Low & Bonar (LWB), the specialist materials manufacturer, announced the completion of senior unsecured notes to raise 45 million Euros (37 million pounds). The notes carry a coupon fixed at 5.9% and are repayable in September 2016, which will diversity the firm's sources of funding, extend its debt maturity profile and provide a natural hedge for group currency exposures. The proceeds will be used to repay drawings under the group's existing bank facilities which are currently being refinanced. Shares in the firm dipped 0.5p to 38p. ServicePower Technology (SVR) shares rose 0.125p to 4.125p after the outsourced services and field management firm announced making steady progress in the first half of 2010. For the period ended 30th June 2010, pre-tax profit was at 0.7 million pounds compared to a 2 million pounds loss in the comparable period a year earlier as revenue rose by 6% to 10 million pounds. This was driven by the changes made during the previous year as well as having substantially reduced its overheads which are enabling the company to be more competitive in quoting for new business. “If the current level of business enquiries become orders in the near future, it is anticipated there would be a significant positive effect on the company's profitability, “chairman Lindsay Bury commented. The Week AheadWe expect a busy week on the news-flow front from the small-caps next week. Property investor A&J Mucklow (MKLW) and confectionary retailer Thorntons (THT) are due to provide the market on final results next Wednesday with veterinary pharmaceutical company Dechra Pharmaceuticals (DPH) due to release its results a day earlier. Later on in the week investors will be looking for a positive update from building and engineering products group Alumasc (ALU), shares in which are expected to fall as the construction industry survey revealed sudden signs of a slowdown. Amongst the mid-cap, pub operator JD Wetherspoon (JDW) will be providing final results on Friday, with shares expected to show signs of a recovery following peer group Punch Taverns's recent positive trading statement. What investors will be looking for however is how the steps to cut government borrowing, such as higher taxes and public spending cuts, will hit activities at construction equipment rental group Ashtead (AHT) and residential developer Redrow (RDW). Another mid-cap firm updating the market next week is electronic firm Premier Farnell (PFL), shares in which have, more or less, gone up since November last year. Amongst the blue-chips we look forward to trading updates from both Home Retail (HOME) and food retailer Morrison Supermarkets (MRW). Out of the UK big four superstore groups, Morrison is expected to deliver the strongest overall trading momentum during the last six months.
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