Worries about trading at Kingfisher during the all-important Easter weekend have been exaggerated. That was the message from Merrill Lynch to its clients yesterday after a meeting with Duncan Tatton-Brown, the retailer's finance director.
Concerns about the performance of the group's B&Q business were sparked by its decision to heavily discount several DIY lines in the run-up to Easter in an effort to combattough competition from rivals. However, Merrill believes these price cuts have been funded by suppliers and they will not impact margins at Kingfisher. Hence it urged investors to use the stock's recent weakness as a buying opportunity.
The US broker said: "Despite a rather uninspiring March and Easter weekend, current earnings forecasts are still very well underpinned."
It believesB&Q and Castorama are in control of their destiny and told investors it would be premature to write-off the B&Q growth story on the base of a few weeks' softer trading. Kingfisher shares have been subdued in the past month. They underperformed the general retail sector by 4 per cent and the FTSE 100 by 5 per cent. The stock ticked 1p better to 281p yesterday.
Meanwhile, investors brushed aside cautious comments from Morgan Stanley and piled into GlaxoSmithKline, sending shares in the pharmaceuticals giant 68p higher to 2,675p. The group is dependent on dollar earnings and the recent rise in the value of the US currency will without doubt boost GSK profits. There is also a growing belief among City analysts that Advair, GSK's asthma treatment, will soon get regulatory approval for use by children. The drug is the group's most important product, with sales last year of more than £2bn. Advair is also tipped to be the main driver of incremental revenue growth over the next five years, with brokers forecasting sales of £4.5bn by 2008.
Elsewhere in the sector, AstraZeneca put on 68p to 2,675p while Galen Holdings gained a more modest 4p to 812p. Acambis roared 18.75p better at 319p, as institutional investors were rumoured to be buying into the stock after its recent weakness. Among them were said to be Deutsche Bank and Goldman Sachs.
The FTSE 100 made up some of Wednesday's losses and closed 20.1 points better at 4,505.5, thanks to a strong performance by the oil sector. Shell put on 9.25p to 391p and BP gained 11p to 499p. Informa improved 18.25p to 373.75p after ABN Amro started coverage of the exhibitions organiser and publisher with a "buy" recommendation. The Dutch broker applauded its soon-to-be-completed merger with Taylor & Francis, which it says will create a company with "a portfolio of market-leading products".
Huntleigh Technology jumped 11p to 342.5p as a large overhang of stock was cleared from the market. Brokers placed more than 5 million shares, about 10 per cent of the company's share capital, at 327p. XP Power held steady at 383p despite the sale of 25,000 shares at 330p by Mike Laver, an executive director at the group. There was also director selling at Wolfson Microelectronics, up 4.5p to 286p. John Urwin, the semiconductor group's operations director, bagged £260,000 via the disposal of 92,500 shares at 280p.
Baltimore Technologies ticked 0.25p higher to 41p as the rebel shareholder Acquisitor disclosed the purchase of a further 130,000 shares, taking its total holding to 13.6 per cent. Despite the share price rise, Baltimore continues to trade at a discount to its £25m cash pile. Meanwhile, Acquisitor can do with all the shares it can get its hands on after requisitioning an EGM at the end of last month. The fund hopes to appoint its own directors to Baltimore's board to push through a return of capital to shareholders.
PKL, the mobile kitchens and operating theatres group, made its debut on AIM as Arbuthnot Securities raised £3.5m for the company via a placing of 3.1 million shares at 110p. In addition, the broker sold £6.5m of shares on behalf of its founders at the same price. PKL closed at 127.5p.
Also celebrating its maiden session was Visonic, the security systems developer. The Israeli company raised £9.6m from an oversubscribed placing on the main market at 88p and closed yesterday at 98p. Over the past three years, Visonic's turnover has increased 28 per cent and pre-tax profits have grown 66 per cent. It boasts a list of international blue-chip customers that include BT, Honeywell and Siemens.
And finally, word has it Oakdene Homes, the Ofex-listed house builder that is about to make the move up to AIM, will on Monday start its roadshow of the City, via which it hopes to raise £5m. The broker Seymour Pierce will handle the fund-raising and looks to have a winner on its books. Oakdene, unchanged at 120.5p yesterday, trades at just four times earnings, compared with a sector average of seven.Reuse content