Market Report: Credit Suisse puts Qinetiq back on the radar
Tuesday 06 June 2006
Few public offerings in recent years have attracted quite as much hysterically negative publicity as that of Qinetiq, the defence technology agency that came to the market in early February. Since then, however, the shares have remained firmly underneath radar screens and out of the finance pages, falling 23 per cent from the high of 219.5p they hit soon after listing to open at 168.5p.
The company reports its debut results tomorrow and, according to dealers, the investment bank Credit Suisse spent most of yesterday pushing the shares. The initial public offering was the first by the Government since taking power in 1997 but the decidedly dull performance of the shares has meant the controversy over the sale has died down.
One broker said: "Lots of us bought into the stock at the initial offering, but it turned out to have been hugely oversubscribed but hugely overhyped. The market doesn't seem to like Qinetiq because the newsflow hasn't been bad." Even so, the shares gained 6.5p to close at 175p yesterday, with 4.6 million shares changing hands.
The housebuilder Persimmon was out of favour with investors after brokers said the premium being priced into its under-offer rival McCarthy & Stone is too high. Persimmon, the only housebuilder in the FTSE 100, dropped 36p to close at 1,200p, while McCarthy & Stone closed 28.5p lower at 879p. The housebuilders have had a strong week and profit-takers sold off the entire sector.
Trading was quiet for a Monday, with a lack of decent stories to encourage traders into the market. The FTSE 100 closed 2.5 weaker at 5,762.1, with the bulk of the support being provided by BP and Royal Dutch Shell, up 2.5p to 636p and 21p to 1,845p respectively on the back of stronger crude oil prices.
Shares in PartyGaming fell as speculation intensified that two of the online poker giant's founders would offload up to 500 million shares worth an estimated £600m. The shares closed down 4.75p at 122.5p. Anurag Dikshit and Vikrant Bhargava quit the board two weeks ago, raising questions over their stakes in the business. Insiders said the two men were looking to sell between 450 and 500 million shares through a share placing arranged by PartyGaming's broker, Dresdner Kleinwort Wasserstein.
Carphone Warehouse was well bid before today's results, as traders took reports that the company is struggling to cope with demand for its "free" broadband as a good sign. Dealers will be keen to hear developments this morning, but the rumour among traders late yesterday was that the unbundling of the local loop, crucial to Carphone Warehouse's strategy, is not going as smoothly as anticipated. The shares succumbed to a late bout of profit-taking to close 4.25p firmer at 331.5p.
Two stocks that traders believe are firmly in play for a takeover offer remained well bid yesterday. Enodis, the manufacturer of commercial ovens and refrigerators, closed 2.25p better at 202p, with traders predicting a bid this week that is expected to value the shares at 220p. Meanwhile, the struggling soft drinks manufacturer Britvic, fresh from its second profits warning since coming to the market six months ago, is also expected to face a bid, this time from PepsiCo, at up to 280p per share. Shares in Britvic nudged 7.5p better to 218.75p.
The photo booth operator Photo-Me International rallied strongly as it said it was conducting a review that could lead to a sale. Many traders have been bullish on the shares for some time, believing that it is a matter of when, not if, identity cards are introduced in the UK. The shares climbed 20.5p to 106.5p, as traders said a bid could value the shares at up to 115p.
Traders took the news that the moderate left-wing candidate, Alan Garcia, appears to have won the general election in Peru as good news for Monterrico Metals. The company was rumoured to be having problems accessing its assets in Peru, which are thought to include one of the biggest copper deposits in the world at the Rio Blanco prospect. The broker Collins Stewart reiterated its "buy" recommendation on the shares, along with a target price of 669p. The shares climbed 33.5p to close at 275p.
Finally, there was a disappointing first day of dealing on AIM for the uranium producer Brinkley Mining, which is developing prospects in the Karoo province in South Africa. The shares listed at 50p after a placing by the broker Beaumont Cornish that raised £19.3m, giving the company a market capitalisation of £152.4m. By the close, they had dropped to 33p, a 34 per cent discount to the placing price. One market-maker blamed sellers who bought the stock in a pre-IPO placing at a big discount, with no lock-in period, taking the opportunity to sell at the higher levels.
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