Tuesday, November 19, 2013

Tuesday's Stock Market Report from UK-Analyst: featuring Bodycote, easyJet, Afren, Falanx and Plethora Solutions

From UK-Analyst.com: Tuesday 19th November 2013

The Markets

The Organisation for Economic Co-operation and Development (OECD) has cut both its 2013 and 2014 global growth forecasts, citing economic weakness in emerging markets. The OECD now expects global GDP to grow by 2.7% this year, down from the 3.1% it predicted 6 months ago. Growth forecasts for 2014 were revised from 4% to 3.6%. The ECB was also cautious on the future prospects for the beleaguered Eurozone, arguing that there is much work to be done. OECD Chief Economist Pier Carlo Padoan commented, "Risks of deflation may be slowly increasing. The ECB must be very careful and be prepared to use even non-conventional measures to beat any risk of deflation becoming permanent."

Sticking with the Eurozone, the region's trade surplus grew by more than expected in September on the back of rising exports and flat imports. The September trade surplus for the 17 countries sharing the euro was 13.1 billion euros (11 billion pounds), well up on the 8.6 billion euros (7.2 billion pounds) surplus which stood in September last year. The increase was helped by an improved trade performance from the much maligned economies of Spain and Portugal as their competitiveness improved. However, economic leaders still expect more from Germany with European Commission President Jose Manuel Barroso last week arguing, "The issue is whether Germany ... could do more to help rebalance the European economy."


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At the London close the Dow Jones was up by 52.50 points at 16,014.20 and the Nasdaq was down by 2.08 points at 3,420.50.

In London the FTSE 100 closed down by 25.45 points at 6,698.01 and the FTSE 250 was down by 24.88 points at 15,265.60. The FTSE All-Share was down by 12.43 points at 3.563.06 while the FTSE AIM Index increased by 1.08 points to 810.77.

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Broker Notes

Investec upgraded its "add" stance to a "buy" outlook on thermal processer Bodycote (BOY), increasing its target price from 725p to 750p. The broker feels that the latest interim management statement shows Bodycote's potential in terms of trading resilience and cash generation. Meanwhile, N+1 Singer maintained its "buy" recommendation on the group, arguing that the company will be one of the main beneficiaries in a sector of an improving demand backdrop. The shares were down by 29.5p at 618.5p.

Liberum Capital has downgraded its "buy" recommendation to a "hold" stance on oil and gas services provider Petrofac (PFC), lowering its target price from 1,550p to 1,380p. The recent performance update from the company has raised doubts for Liberum in relation to Petrofac's ability to pick up new contracts. Instead, argues the broker, Petrofac is more concerned about further slippage from current clients rather than winning new business. The shares slipped by 23p to 1,177p.

Canaccord Genuity cut its "hold" recommendation to a "sell" stance on lender Provident Financial (PFG), keeping its target price at 1,400p. The broker believes that the company's plans to expand in Poland face set backs. Canaccord feels that low ATM growth rates and comparatively higher card transaction fees vs. other eastern European countries could act as barriers. On this basis, Canaccord feels that the Poland roll-out will take longer than expected, with profitability remaining negligible until 2015. The shares fell by 25p to 1,565p.

Blue Chips

Airline operator easyJet (EZJ) announced a 10.5% increase in revenues to 4.3 billion pounds for the year ended 30th September, while pre-tax profits were up by 51% at 478 million pounds. The results were boosted by a 7% increase in total revenue per seat against the backdrop of a "benign capacity" environment, the implementation of allocated seating and improvements to easyJet.com. Moreover, the budget airline attributed some of the growth in profits to growth in Europe and the takeover of Flybe's slots at Gatwick airport . The shares flew upwards by 89p to 1,345p.

Product tester Intertek (ITRK) claimed that revenues grew by 7.6% over the first 10 months of the year in a performance boosted by recent acquisitions and favourable currency fluctuations. Geographically, the growth was driven by activity in the Middle East, Latin America and the Indian sub-continent. Separately, Intertek said it has agreed to acquire Architectural Testing, a building products tester, for a cash consideration of 59 million pounds, The shares plunged by 79p to 3,102p.

Engineering company Smiths Group (SMIN) said that overall trading over the three months ended 2nd November was in line with expectations. The firm did however warn that foreign exchange and sales to government-funded customers both remain a risk. For the period in question, operating profit improvements in the Smith's Detection, John Crane and Flex-Tek divisions more than offset some weakness in Medical and Interconnect. In response to the update, broker Numis retained its "hold" recommendation and 1,400p target price. The shares dropped by 33p to 1,400p.


Mid Caps

Pub operator Enterprise Inns (ETI) confirmed that Chief Executive Ted Tuppen will step down next year after more than two decades in the role. Tuppen will be replaced by COO Simon Townsend, who has been with the group since 1999. Separately, the pub owner returned to like-for-like growth over the final three months of the year, meaning that the company delivered a 2.9% fall in like-for-like sales over its last financial year. Management mentioned that it has now overcome problems caused by issues with its wines and spirits distributor. The shares swelled by 16p to 154p.

Oil producer Afren (AFR) revealed that it has come across almost four times more oil than expected in a relatively under-explored offshore Nigerian basin. Afren, which has partnered with Lekoil on the project, said that the OPL310 site showed a gross recoverable P50 resource estimated at 774 million barrels of oil equivalent, almost four times more than the originally targeted 202 million barrels. Broker FinnCap was quick to react, upgrading its "hold" recommendation to "buy" stance on the shares, which were up by 12.1p at 161p.

Trading platform operator IG Group (IGG) said it has traded "satisfactorily" over the three months ended 30th November, although markets were slightly more subdued than the previous three month period. Broker Numis re-iterated its "add" recommendation on the back of the update, sticking with its 665p target price. The shares fell by 15p to 599.5p.

Small Caps

Meat retailer Crawshaw (CRAW) boasted that like-for-like sales over the 7 weeks after the 26th September have increased by 18%, building on the 10% which was recorded over the previous 8 weeks. The company said the improvement was broadly spread across most of its retail stores in a trend which management feel will continue over the Christmas period. The shares were up by 2.125p to 12.75p.

Drug developer GW Pharmaceuticals (GWP) announced that it generated revenues of 27.3 million pounds for the year ending 30th September 2013, substantially down on the 33.1 million pounds which it achieved over the previous year. This swung the company into a post-tax loss of 2.5 million pounds. GW - which is developing cannabis-based cancer treatments - said that the shortfall came about because of the impact of a one off 9.8 million pounds payment which was received last year. The shares slid by 1.5p to 176.5p.

Surveillance system developer Petards Group (PEG) said that, although trading conditions have remained on the difficult side, order intake in the second half has been in line with its expectations. Petards - which recently won a lucrative 7 million pound contract with the UK government - went on to say that the impact of these previously announced deals will be largely seen in 2014. The shares slipped by 1.125p to 13.5p.

Risk management specialist Falanx Group (FLX) made a 35,150 pound pre-tax profit in its first results since it listed on AIM in June. The came as the firm generated revenues of 2.2 million pounds over the 6 months ended 30th September. The Middle East and Asian-focused company said that it is confident on its future prospects as spending on security is expected to grow significantly over the next five years in these areas. The shares grew by 2.25p to 15p.

Motorcycle manufacturer Vmoto (VMT) has signed an exclusive distribution agreement with the Indonesian company PT. Garansindo Technologies in a deal which will see the company distribute, stock and market the company's Vmoto and E-Max range of electric scooter products in Indonesia. The move may be a lucrative one for Vmoto with 82.5% of road traffic in Indonesia accounted for by motorcycles/ scooters. The shares gained 0.025p, finishing the day at 1.625p.

Plethora Solutions (PLE), a company which owns the rights for a treatment for premature ejaculation, confirmed that its PSD502 product has received marketing authorisation from the European Commission. The decision marks an important step for the company as it looks to successfully commercialise the product in Europe. Broker Daniel Stewart reacted by increasing its target price from 15.7p to 18.9p to reflect the lower risk associated with investing in the company now it has secured the EC approval. The shares were down by 0.5p at 16.125p.

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