Thursday's Stock Market Report from UK-Analyst: featuring HMV, Morrisons and Home Retail Group
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From UK-Analyst.com: Thursday 9th 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 George Osborne has selected Robert Chote, director of the Institute for Fiscal Studies, as Britain’s independent guardian of public finances and the government’s economic forecasts. Meanwhile, the Bank of England left interest rates and the level of quantitative easing unchanged in an almost universally anticipated decision after recent signs have pointed to a relatively robust recovery. Elsewhere, a surge in exports narrowed the US trade gap in July, raising hopes that economic output could accelerate in the second half of the year. Separately, US government figures showed that new claims for jobless benefits fell more than expected last week, offering a rare bright spot for the labour market. At the London close the Dow Jones was up by 76.21 points at 10,463.22 and the Nasdaq was 18.06 points higher at 2,246.93. In London the FTSE 100 climbed 64.42 points to 5,494.16; the FTSE 250 rose 92.8 points to 10,309.51; the FTSE All-Share advanced 27.8 points to 2,829.56; and the FTSE AIM Index finished 7.51 points higher at 725.1. Brokers' Notes Evolution Securities retained its “buy” recommendation and 525p target price for the soft drinks firm Britvic (BVIC). The broker estimates that the 4-5% input cost inflation, as a result of recent increases in raw material costs, could reduce the Brand Contribution margin, which was 40% last year, by around 160-200 basis points. Consequently, it has cut both its Brand Contribution margin and EBIT margin forecast. However, Evolution added, the Fruité acquisition improves the group’s buying power, and is confident it has the ability to take out other direct brand costs. Operational gearing on higher volumes should also compensate. Even after the downgrade, Britvic’s shares stand on a 15% discount to the beer and soft drinks sector and remains an attractive “growth-defensive stock”, the broker concluded. The shares fizzed 2.7p higher to 485.6p. Seymour Pierce retained its “buy” recommendation for the wireless solutions firm CSR (CSR) with a reduced target price from 410p to 382p. Following a summer littered with downbeat comments and updates from the semi-conductor industry, the broker is trimming its forecasts for the firm. It is clearly not making the headlines with its WiFi and combo devices in high end phones, Seymour added. However, the firm is continually making good progress in the non-mobile markets such as automotive and consumer radio. The current valuation suggests that the company has not just dropped behind in the short term but has dropped out of the race altogether. This, the broker believes, it not true as it expects the firm to utilise its considerable cash pile on performance enhancing acquisitions. CSR shares climbed 8.5p to 318.2p. Free Seminar: Introduction to Listed Products with Investors Intelligence and RBS Listed Products Jackson Wong from Investors Intelligence will take you through a full market update from a technical analysis perspective, looking at the major asset classes and where Investors Intelligence view they are heading in the coming months and years. RBS will then explain how to make the most of this market with a range of Listed Products that provide simple, cost effective access to some of the most exciting markets and product types. The event will be held from 5.30pm until 7.00pm on Thursday 16th September 2010 at the RBS offices in Liverpool Street, 250 Bishopsgate. Click here to register for free. Panmure Gordon re-iterated its “buy” recommendation for the energy-focused support services provider Cape (CIU) with an increased target price from 350p to 430p. The broker commented that the quality of the firm’s business is improving but, nevertheless, believes it is not being matched by a just valuation rating. Panmure goes on to say that a solution for closing the valuation gap would be to pursue a Management Buy-Out (MBO) in the same style as Tomkins. This would be more effective rather than soldiering through to the Main Market and should also underpin the stock during times of weaker sentiment, the broker concluded. Cape shares finished 1p lower at 312p. Arden Partners issues a “buy” recommendation for Advanced Medical Solutions (AMS). Interims showed a very strong picture with sales and underlying operating profit up by 47% to 14.5 million pounds and 136% to 2.1 million pounds, respectively, for the six months ended 30th June 2010. Furthermore, the relocation to a new purpose built facility is on schedule and it is anticipated that, once completed, the move will help improve operating margins by between 2-3% over the next two to three years. The group has been very successful in Europe with LiquiBand, Arden added, and has now launched in the large US market. The initial launch has been very encouraging and whilst the underlying trend is unlikely to be visible until the fourth quarter, the potential is significant and should result in high levels of growth for LiquiBand over a sustained period. AMS shares finished flat at 54.25p. Blue-Chips Home Retail Group (HOME), owner of both Argos and Homebase, has warned that its half-year profits will be down by as much as 25% as it battles tough trading conditions. For the six months to 28th August, like-for-like Argos and Homebase sales fell by 6.5% and 0.8%, respectively. The home retailer said, “For the year as a whole, we expect to deliver...pre-tax profit of between 250 million pounds and 275 million pounds, which is in line with the bottom half of the current analyst range.” As always, the outcome will depend upon trading at Argos in its peal Christmas period, the firm added. Home Retail shares slipped 6.2p to 215.2p.
FTSE 100 trading calls by text
message William Morrison Supermarkets (MRW), the smallest of the UK’s four main grocers, announced first-half profits rose as discounts brought in more customers and the retailer saved more on distribution and purchasing. For the half-year to 1st August 2010, underlying pre-tax profit climbed by 14% to 410 million pounds as turnover increased by 9.1% to 8.1 billion pounds. Sales at stores open at least a year was up by 0.9%. Commenting on its outlook, the supermarket said, “We expect low market growth to continue in the second half of the year, with further pressure on the consumer.” Morrison shares finished flat at 292.5p. Eurasian Natural Resources Corporation (ENRC), the mining company that last month bought rights to the Democratic Republic of Congo’s Kolwezi project, defended the acquisition after previous owner First Quantum Minerals threatened to sue. The Congolese government shut the copper and cobalt project last September after saying First Quantum hadn’t fulfilled its contractual obligations. “Eurasian undertook an extensive due-diligence process” before making the purchase and remains “fully satisfied” with the findings, chief executive Felix Vulis said in a statement. If First Quantum takes “an adverse action, Eurasian reserves all of its rights against First Quantum and its subsidiaries,” the company added. The shares dipped 5.5p to 854p. Mid-Caps Renishaw (RSW) shares jumped 127p to 1,004p after the engineering company announced that trading in the first two months of the new financial year has been “very positive.” The firm has seen strong demand for its metrology products across all its main geographies, particularly in Japan and the rest of Asia, where sales have been running at approximately double last year’s levels for the same period. Group revenue in July and August has been approximately 20 million pounds per month and the order book currently stands at approximately 25 million pounds. Order visibility remains at around 4 to 5 weeks’ sales. Markets Move Fast. Keep up with GFT's Free Guide. Learn to Harness Market Volatility.
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Premier
Farnell (PFL)
shares rallied 17.5p to 257.1p after the electronic
distributer more than doubled its profit in the second
quarter, beating market expectations, helped by strong
growth in China and a recovery in North America. The
company, which counts Philips, Microsoft and Nokia
amongst its customers, posted underlying pre-tax profit
of 23.8 million pounds for the three months to 1st
August, up from 10.7 million a year, as revenue rose 30%
to 252.1 million. The sales growth had continued in
August, with sales up more than 25% year-on-year.
Commenting on the results, chief executive Harriet Green
said, “Despite the strong first half performance we
remain cognisant of the uncertainties surrounding the
economic backdrop and the inherent limited visibility we
have in our business.”
Housebuilder Redrow Group (RDW) swung to a full-year pre-tax profit, well ahead of analyst expectations. For the 12-months ended 30th June 2010, the company reported a pre-tax profit of 0.7 million pounds, against last year’s loss of 140.8 million pounds, as revenue increased by 31.5% to 396.9 million pounds. This was due to both a 22% increase in legal completions to 2,587 homes and an 8.7% increase in the average selling price to 149,300 pounds. “While we remain in a period of tough economic conditions and political uncertainty the work that we have done over the past year means that Redrow is in good shape to continue to make progress,” chairman Steve Morgan commented. Redrow shares finished 0.1p ahead at 130.4p. Small Caps, AIM and PLUS Eastern Europe-focused explorer Aurelian Oil & Gas (AUL) and its Romanian partner Europa Oil & Gas (EOG) announced that a significant upgrade on the Cuejdiu License Prospective Resources in Romania was likely, following new findings at the site. Aurelian, which operates in Poland, Slovakia, Romania and Bulgaria, said it identified 50 to 100 million barrels of gross oil leads in the Cuejdiu licence. Separately, the partners confirmed that they expect first gas from the Trzek-2 well in Poland by the end of 2011. Aurelian shares climbed 1.75p to 45.75p while Europa shares rose 1.75p to 13.75p.
Three new small cap tips - out today on
Small
Cap Shares Pittards (PTD) posted improved results for the first half of 2010 as the leather producer’s recovery and return to profitability continues apace. For the six months ended 30 June 2010, pre-tax profit rose to 0.9 million pounds, up from 0.3 million pounds in the comparable period a year earlier, as revenue increased by 31% to 16.6 million pounds. This was driven partly from the relative weakness of sterling but also from a recovery from the global recession which prevailed in early 2009. “Global confidence is still variable with uncertainty about whether the recession has truly ended but we enter the second half of the year with a strong order book and sterling still relatively weak compared to the levels of recent years,” chairman Stephen Boyd commented. Pittards shares jumped 0.25p to 2.5p. Eros International (EROS), through its wholly owned subsidiary Eros International Media, is set to tap Indian and Bombay capital markets by opening its public issue for subscription on 17th September. In an initial public offering, the entertainment company plans to raise up to 1 billion Indian rupees (49 million pounds) which it will subsequently use to acquire and co-produce Indian films. Eros shares rallied 30p to 254p. Regal Petroleum (RPT) shares dropped 4.5p to 30.25p on news the oil and gas explorer has plugged and abandoned the E-1 Sagna exploration well in Romania after failing to establish gas inflow. The firm said the well was spudded on the 22th August, drilled to a total depth of 980 metres, and penetrated two sandstone intervals. With the completion of this operation, the company has fully discharged its obligations with respect to the Barlad concession and a strategic review of its Romanian assets is underway, it added. Urals Energy (UEN), an independent exploration and production company with operations in Russia, announced a swing in profits despite revenues falling. For the six months ended 30th June 2010, revenues declined by 23% to 11.7 million dollars (7.6 million pounds) as a result of decreased sales volumes totalling 210,385 barrels, down from 552,865 barrels in the same period a year earlier, following the divestment of Dulisma. Nevertheless, decreased expenses and financial costs in 2010 resulted in a net profit of 1.6 million dollars (1 million pounds) compared with a net loss of 440 million dollars (286 million pounds) for the six months ended 30th June 2009. “Following the significant capital restructure undertaken in 2010 and 2009, the directors view the future of the company with increasing confidence,” the group added.
Next Growth Company Event: Wednesday 29th
September As expected, HMV Group (HMV) admitted its much heralded move into organising live music events had not lived up to expectations, as it seeks to cope with falling sales of music and video games. The owner of the HMV and Waterstones chains said attendance at the inaugural ‘High Voltage’ festival, which was held in London’s Victoria park in July, was “disappointing ”, even though the event’s main stage played host to bearded rockers ZZ Top and to Foreigner, whose ballad “I want to know what love is” reached number one in 1984. However, the group expressed confidence that a programme of changes to its product mix in HMV stores, combined with an improved schedule for video-game releases would drive improved sales in the run-up to Christmas. The shares slipped 7.25p to 59.25p.
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