Wednesday, November 20, 2013

Wednesday's Stock Market Report from UK-Analyst: featuring GlaxoSmithKline, Telecom Plus, Kentz and Rangers International

From Tuesday 19th November 2013

The Markets

Contrary to popular belief, minutes from this month's Monetary Policy Committee meeting suggested that there is no rush to raise interest rates, even after unemployment falls to 7%. The minutes show that all nine members voted to leave interest rates at 0.5% - unchanged since March 2009. The news comes a week after Bank of England Governor Mark Carney said that the economic recovery in the UK is truly beginning to take hold. David Kern, Chief Economist at the British Chambers of Commerce, commented, "Businesses will be pleased with the unanimous decision to keep rates on hold, as well as the reiteration that reaching the 7% unemployment threshold will not automatically trigger a rate increase."

Over in Asia, new data revealed that Japanese exports have increased by the largest amount in more than three years. The figures show that exports rose by 18.6% to 6.1 trillion yen (38 billion pounds) in the year to October in an improvement driven by increased international demand for cars. A weaker yen has also enticed world-wide buyers who can now buy more with their money. Takeshi Minami, Chief Economist at Norinchukin Research Institute in Tokyo, argued, "US private-sector demand remains strong and European economies appear to be bottoming out. If advanced economies recover, Japanese exports can rise more."

At the London close the Dow Jones was up by 15.76 points at 15,982.79 and the Nasdaq was up by 14.19 points at 3,392.32.

In London the FTSE 100 closed down by 16.93 points at 6,681.08 and the FTSE 250 was down by 86.85 points at 15,178.75. The FTSE All-Share was down by 10.69 points at 3.552.37 while the FTSE AIM Index increased by 0.48 points to 811.25.


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Broker Notes

Deutsche Bank has cut its "buy"recommendation to a "hold"stance on electronic group Electrocomponents (ECM), increasing its target price from 285p to 310p. After a decent recent share price performance the investment bank believes that the most significant increase has been and gone while the risk/reward profile for the next leg up is more balanced. On the whole, Deutsche Bank argues that the shares are now pretty much fairly valued. The shares were down by 2.5p at 294.4p.

Westhouse Securities cut its "add"outlook to a "neutral"stance on rutile producer Sierra Rutile (SRX), leaving its target price unchanged at 71p. The main driver of the change in stance is the recent share price movement, with the stock recently rising from 56p to 71p on the back of news that the company was engaged in discussions regarding a potential takeover offer. The broker also notes the fact that Sierra has downgraded its 2013 production guidance from 125,000t to 120,000t, citing the on-going weakness in the rutile market. The shares fell by 2p to 69.5p.

Berenberg Bank cut its target price from 3,472p to 3,430p on pharmaceutical giant AstraZeneca (AZN), re-iterating its "hold"recommendation in the process. The broker has grown more cautious on the potential impact of foreign exchange fluctuations on earnings and also feels that the potential for short-medium term upside is on the low side given the 14% increase in share price since the beginning of this year. The shares inched up by 0.5p to 3,308.5p.

Blue Chips

Drug developer GlaxoSmithKline (GSK) revealed that it has agreed to the sale of 28.2 millionordinary shares in Aspen Pharmacare in a deal worth around 425 million pounds. The sale brings down GlaxoSmithKline's share in the South African drugmaker from around 18.4% to 12.4% but management stressed that it intends to remain a significant shareholder in Aspen, while also retaining a seat on the board. The shares grew by 3.5p to 1,631.5p.

Gas producer BG Group (BG.) confirmed that the Jasmine Field in the UK North Sea has begun production. The company - which has a 30.5% interest in the project - explained that the Jasmine Field was the largest discovery to come onstream in the North Sea since the giant Buzzard field began production in 2007. Once production is fully up and running, the project in question is predicted to contribute around 30,000 barrels of oil equivalent per day net to BG Group. The shares increased by 6.5p to 1,252p.


Mid Caps

Utility provider Telecom Plus (TEP) saw revenues increase by 17% to 245.8 million pounds over the 6 month period ended 30th September, while pre-tax profits grew by 10.1% to 13.7 million pounds. The performance was boosted by an increase in customers as well as an increase in the average number of services each customer takes.

The firm also announced a 130 million pound placing in order to part fund the acquisition of Electricity Plus Supply and Gas Plus Supply from utility giant Npower. The 218 million pound deal brings with it 770,000 customer accounts and is expected to be materially earnings enhancing in the first full financial year following completion. The shares surged by 298p to 1,805p.

Engineering and construction company Kentz Corporation (KENZ) has been awarded a project for the engineering, procurement, installation and commissioning for wellhead industrial control systems by Qatar Petroleum. As part of the deal - which is worth around $190 million (117.65 million pounds) - Kentz will work on approximately 775 wells across the Dukhan oilfield in Qatar. The shares swelled by 13p to 555p.

Lender International Personal Finance (IPF) has announced the appointment of Adrian Gardner as Chief Financial Officer, in a move which will become effective from the 2nd January. Gardner will be moving over from RSM Tenon where he has overseen the re-structuring following his arrival in late 2011. Management argued that the appointment is testament to the growing momentum within the business while reflecting its ambitions for further growth. The shares were up by 14p to 590p.

Small Caps

Field service manager ServicePower Technologies (SVR) claimed that the revenues generated in 2013 by mid-October had already exceeded all of the revenues generated in 2012. The company attributed the improvement to the development of the company's field service platform which has resulted in an extended market reach and new customer wins. In particular, the company said that it benefitted from new contracts with an international beverage bottler and an international consumer products engine manufacturer. The shares soared by 1.5p to 5.13p.

Polymer technology company Revolymer (REVO) announced that it has filed for marketing authorisation in Europe for itsnicotine gumsproducts. If approval is granted by the Medicines and Healthcare Products Regulatory Agency, Revolymer will be permitted to market its 2mg and 4mg strength nicotine gum in the UK, Ireland, Poland and Spain – the first European countries in which Revolymer plans to sell its products. The shares edged upwards by 3p to 69.5p.

ITM Power (ITM), the clean energy company, revealed that it has received its first order for an electrolyser plant from a UK Government Agency. Although the company did not release the financial details of this particular deal, it did emerge that the company is now processing 4.2 million pounds worth of orders all told. Management argued that the contract award was testament to its technology and its ability to deliver products to a competitive budget. The shares rose by 3.5p to 47p.

Scientific instrument designer Judges Scientific (JDG) claimed that 2013 earnings per share is now likely to come in above market expectations after a "satisfactory"performance in terms of margins and sales. The group also said that the recent acquisition of Scientifica Limited is performing well while, by the company's own admission, its order intake remains slightly subdued going into 2014. The shares jumped by 45p to 1,775p.

Fallen giants Rangers International Football Club (RFC) revealed that it has appointed Graham Wallace asthe company'snew Chief Executive Officer with immediate effect. Mr Wallace makes the switch from his current position as Chief Operating Officer of 2012 Premier League champions Manchester City having also served the club as CFO. The club went on to say that Mr Wallace is not currently beneficially interested in the issued share capital of the Company. The shares were down by 1p to 41.5p.

Financial software group Vipera (VIP) revealed that it expects to report revenues of 1.4 million pounds for 2013, confirming a July announcement which suggested that this year's revenues would come in above last year's figure of 974,000 pounds. As a result, pre-tax numbers should comfortably exceed the 540,000 pounds loss it generated in 2012. The shares increased by 0.88p to 8.88p.

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