Tuesday's Stock Market Report from UK-Analyst: featuring Connaught, Whitbread and HSBC
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From UK-Analyst.com: Tuesday 7th 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 The winner of last week's competition is Charles Nicolay who correctly identified the mystery chart as British Airways. Watch out for a new competition this Friday. HSBC confirmed that its executive chairman Stephen Green would step down from his role before the end of the year to become minister of state for trade and investment. It was also revealed that legendary banker Bob Diamond will replace current CEO John Varley next year. Meanwhile, the UK is no longer a world leader in producing graduates, according to data published by the OECD, the association of developed nations. It found that Britain which was in the top four a decade ago, as measured by the percentage of people obtaining a university degree, is now in 15th. Elsewhere, European equities fell for the first time in four sessions as concerns about European banks and worse-than-forecast data showing a decline in German manufacturing orders dampened investor sentiment. At the London close the Dow Jones was down by 76.02 points at 10,371.91 and the Nasdaq was 16.17 points lower at 2,217.58. In London the FTSE 100 slipped 31.37 points to 5,407.82; the FTSE 250 dropped 54.54 points to 10,185.87; the FTSE All-Share lost 16 points to reach 2,790.78; and the FTSE AIM Index rose 1.55 points to 716.16. Brokers' Notes GE&CR reinstated its "speculative buy" recommendation and 7.5p target price for Angel Mining* (ANGM). The mining company has had a turbulent history but, with medium term finance apparently secured and the option of long term funding also available, the research house believes the group's long held goal of returning the Black Angel mine to production is finally within reach. Shareholder dilution is an understandable worry, however, and while the firm hopes to raise Black Angel finance predominantly with debt, the research house believes further share issues are inevitable. In spite of this, the 25 million dollars (16 million pounds) financing package is a very welcome development and one that alleviates the recent financial distractions, GE&CR added. Angel rose 0.25p to 4.875p. Seymour Pierce moved its recommendation from "hold" to "outperform" for the Indian-based facilities management and guarding company Mortice (MORT) with an increased target price of 53p. For the year ended 31st March 2010, group revenue increased by 35% to 31.6 million dollars (20.6 million pounds) and operating losses were much reduced from 3.2 million dollars (2.1 million pounds) a year earlier to 0.7 million dollars (0.5 million pounds). The company indicated in the statement that it was seeing the beginnings of a recovery in the last quarter of the financial year and is confident this will continue into 2010. This was substantially better than the broker had anticipated and it believes the firm is well-placed to build on the strong platform that it has established over the past 15 years to become a major provider of outsourced building services in India and elsewhere. Mortice shares finished flat at 48p.
Meet the CEOs of three small cap stocks at a Free
City Seminar Panmure Gordon retained its "buy" recommendation for the business and technology service company Logica (LOG) while lowering its target price from 163p to 154p. According to trade press, Computer Weekly, the UK government is to initially cut its IT and outsourcing costs by 800 million pounds following meeting with its main suppliers. While the broker applauds Computer Weekly for digging out a number, it acknowledges there is still no clarity about the outlook for Government IT spending. Thereby, in order to further reflect a deteriorating outlook for public sector spend, Panmure has elected to take a 42 million pounds reduction (the average across the 19 suppliers) and apply it to its Logica UK revenue estimate. The shares slipped 3.3p to 113.7p. Evolution Securities downgraded its recommendation for the mining group Rio Tinto (RIO) from "add" to "neutral" while maintaining its 3,510p target price. The company has repaid the bulk of its Alcan acquisition debt and sold off perhaps 5 billion dollars (3.25 billion pounds) of Alcan assets, together with writing down about 10 billion dollars (6.5 billion pounds) of acquisition goodwill. Nevertheless, the firm is still failing to earn anything like an adequate rate of return on its investment, the broker believes. Evolution added that with additional issues adversely impacting aluminium earnings in the second half the division remains in the doldrums. The threat of a further Australian tax now Julia Gillard has gained enough support to become Prime Minister could also hit sentiment, the broker concluded. Rio shares fell 62.5p to 3,447.5p. Blue-Chips Whitbread (WTB), the hotel and restaurant group, achieved further strong results with continued growth for the 24 weeks to 19th August 2010. In a trading update, the company reported total sales were up by 14% and like for like sales were up by 7.9%. Sales at Premier Inn hotels open for more than a year rose by 10.7% compared to the previous year with revenue per available room increasing by 9.8%. Sales at Costs Coffee outlets open for more than a year were up by 8.3%. "We remain confident about the outturn for the year, despite facing tougher comparatives in the second half," chief executive Alan Parker commented. Whitbread shares finished 11p lower at 1,501p.
Which way for the FTSE? Barclays (BARC) shares dropped 8.85p to 314p after the bank confirmed Bob Diamond, head of its fast growing investment bank, as its next chief executive. Mr Diamond, a former teacher who has built Barclays Capital from scratch into a multi-billion pound operation, will take over from John Varley at Barclays' annual meeting next March. After building BarCap steadily for years, Diamond's succession to the chief executive role is widely seen as having been secured when he masterminded the bold acquisition of the defunct Lehman Brother's US assets at the end of 2008. His annual salary will jump from 0.25 million pounds to 1.35 million pounds, with a potential annual bonus of 3.375 million pounds. Three weeks after BHP Billiton (BLT) made its initially secret 39 billion dollars (25 billion pounds) approach to PotashCorp, the Anglo-Australian mining company is facing conflicting pressures over the price it might have to pay to secure its target. BHP has offered 130 dollars (85 pounds) a share, which the Potash board has described as "inadequate", reminding investors of all the plants and animals that the developing world will consume over the next decade. The presence of an alternative bidder would bolster their case, but in spite of rumours of interest from China, none has yet emerged. Nevertheless, acceptance is growing from BHP shareholders that some sort of increase will be necessary. BHP shares fell 27.5p to 1,892.5p. Mid-Caps Ashtead Group (AHT) shares rose 1.65p to 93.65p subsequent to the equipment-hire company announcing "good group profit growth" for the first quarter, reflecting an improvement in both divisions. For the first quarter ended 31st July 2010, pre-tax profit rose by 35%, compared to the same period a year earlier, to 11.9 million pounds on sales 8% greater at 239.1 million pounds. "Whilst end markets remain fragile, our strong performance in fleet on rent reflects the impact of the responsible correction in fleet sizes throughout the rental industry and increased outsourcing by customers, a trend we expect to continue," chief executive Geoff Drabble commented. The company added that it was boosted by lower costs, reflecting the impact of measures it took in earlier quarters.
Malcolm Burne was the genius behind Golden
Prospect Gemdiamonds (GEMD) announced that a 196 carat rough white diamond has been recovered from the Letšeng mine in Lesotho. The diamond is expected to achieve a substantial price per carat after preliminary examinations indicate the anticipated production of top colour and top clarity polished diamonds. Commenting on this, chief executive Clifford Elphick said, "Letšeng continues to live up to its reputation as a unique producer of exceptional diamonds and the recovery of this remarkable 196 carat white diamond reinforces its position as one of the great mines in the diamond industry." Shares in the company finished 1.5p higher at 196.5p. Connaught (CNT) has suspended its shares pending clarification of the facilities management's financial position after failing to find a solution to the funding issues it is currently facing. This follows the continued discussions with its lenders and other sources of finance with the objective of securing additional funding and a restructuring of the group's financing. "The group now believes that the availability of additional funds from its lenders will not be forthcoming," the firm added. Evil Knievil from T1ps.com yesterday advised investors to "keep selling at down to 10p." Well, did you? If you missed out on this massive shorting opportunity, click HERE to get the Evil Diaries 3 times a week. Small Caps, AIM and PLUS Indebted German property investor Speymill Deutsche Immobilien (SDIC) announced it was mulling approaches from third parties keen to shore up its troubled balance sheet in moves that may lead to a takeover. The firm, which owns more than 26,000 apartment units in and around some of Germany's largest cities, revealed it was reviewing the proposals and would update the market as appropriate. This follows recent breaches in covenants linked to three of its four credit facilities as a result of increased provisions for bad debts and a fall in the value of its property portfolio. Speymill shares jumped 0.02p to 0.09p. Sunkar Resources (SKR), the phosphate fertiliser manufacturer, will receive up to 200 million dollars (130 million pounds) in debt financing for a term of up to 12 years to finance its Chilisai Phosphate Fertilizer project in Kazakhstan. In a memorandum of understanding with Eurasian Development Bank, the firm said it will need to meet certain conditions such as ensuring the project meets a suitable equity to debt ratio as well as promoting economic integrations in the bank's member states. Sunkar shares finished 0.5p lower at 29.5p. 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. Mavinwood (MVW) shares rallied 4p to 28.75p as the document storage company returned to profitability. For the six months ended 30th June 2010, the firm reported a pre-tax profit of 0.4 million pounds compared to a 2.1 million pounds loss in the comparable period a year earlier despite revenue falling by 5% to 13.4 million pounds. This was attributed to its damp treatment and timber proofing business making a small contribution compared to a 0.4 million pounds loss, together with a 35% drop in head office costs and the closure of ABS, which recorded a loss of 0.8 million pounds in the first half of 2009. In a separate announcement, in line with its stated strategy of developing its data management activities, the firm acquired the document storage company Datacare for 1.2 million pounds. Commenting on this, the firm said: "The group is now stable and represents an excellent platform for growth." ProStrakan Group (PSK) shares slumped 25.5p to 53p on negative news of two of its products. After an inspection of its facility, the Galashiels-based drug company announced manufacturing in the US of is Sarcuso skin patch - a drug used to combat nausea in patients undergoing chemotherapy - has been halted in order to make changes to its internal quality assurance systems. The shortfall is expected to adversely impact the firm's operating profit by up to 5 million pounds. At the same time, the firm revealed that approval for Abstral, a formulation of fentanyl used to treat sudden bouts of severe pain in cancer patients, has been delayed and the company's chief executive, Wilson Totten, has consequently stepped down.
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PLUS-quoted company Quercus
Publishing (QUPP)
is to enter the fiction market in the US and Canada next
year via a joint venture with Sterling Publishing
Corporation, a subsidiary of the bookseller Barnes &
Noble. Quercus, which currently publishes approximately
80 new fiction titles annually, has agreed on an initial
three year deal to publish fiction under a new imprint
named ‘Silver Oak'. Commenting on the joint
venture, chief executive Mark Smith, said: "This
partnership...will give us access to the world's largest
fiction market through a highly cost effective and
managed risk structure. The shares, which have had a
great run recently, finished at 125p.
Another PLUS-quoted company reporting was Greener House Investments (GHIP). For the year ended 30th May 2010, the healthcare-focused investor posted a further loss of 31,962 pounds, up from the 21,383 pounds loss made a year earlier. The group failed to provide the market with key performance indicators arguing that they "do not necessarily promote a better understanding of the development, position and performance of the business." Greener shares finished at 1.125p. * Angel Mining is a corporate client of Bishopsgate Communications which is owned by Rivington Street Holdings (RSH), the ultimate owner of this website; the SF t1ps Smaller Companies Growth Fund which is managed by T1ps Investment Management, a subsidiary of RSH, owns Angel shares.
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