Market Report: Talk of Finnish interest in RSA lifts insurers
Thursday 16 November 2006
Traders have been speculating about takeovers in the insurance sector all year, and although there have been a couple of smaller deals there has yet to be a successful bid in the blue-chip index. That could be about to change if rumours that Finnish insurance group Sampo is poised to launch a bid for Royal & SunAlliance turn out to be true.
Sampo, although little-known to UK investors, recently sold its banking division and is thought to be looking to spend some of its cash pile. For many sector watchers, the lack of a major deal in the insurance industry is something of a surprise. There has not been a firm offer since Aviva bid 708p per share for Prudential in March, and investors seem to have tired of talk of another bid for the Pru. Shares in Royal & Sun climbed 3.75p to 152p, while Aviva added 5.5p to 797p and the Pru ticked 11.5p higher to 661.5p.
Mobile telecoms giant Vodafone has been transformed over the last couple of months as far as analysts are concerned. Deutsche Bank and Lehman Brothers became the latest brokers to upgrade their price targets for Vodafone as both reiterated their "buy" advice, Deutsche with a price target of 155p and Lehman looking for 150p. The shares closed at 139p, up 3.5p and a 12-month high, an 18 per cent rise since the start of August.
Lonmin almost doubled 2005's pre-tax profit to $633m, boosted by hitting production targets and booming metal prices. But underlying earnings fell slightly short of expectations and the shares took a hammering. Broker Seymour Pierce, which has consistently called the stock correctly, reiterated its "reduce" advice with a 2,560p target. The shares closed 125p worse at 2,956p as the company also confirmed the $500m acquisition of AfriOre, a move that may rule out a bid for Lonmin for the time being.
London shares were buoyant on the back of corporate action speculation and a batch of decent results. The FTSE 100 was in positive territory all day and closed 43.2 better at 6,229.8.
Specialist recruitment group SThree has enjoyed a stellar year. The company came to the market exactly 12 months ago today and any investor lucky enough to pick up some shares early on has doubled their money. The stock passed 400p for the first time before closing at 398.5p, up 16.5p, as broker UBS raised its target to 450p and reiterated its "buy" rating. The Swiss broker was also positive on rival recruiter Michael Page, upping its target from 420p to 470p as the shares closed 22.25p better at 435p.
Northern Foods may have calmed investors' nerves for the time being but there are still plenty of sceptics in the market. The company confirmed on Tuesday that it is still on target to sell off some assets, for which it hopes to raise £200m. The shares have climbed sharply since the announcement and closed another 2.75p better at 93.75p yesterday.
In the small caps, traders are looking for an announcement from Software Radio Technology, a month after it confirmed the Chinese airforce has taken its technology on a trial basis. The word among small-cap traders is that the trial has gone so well that the technology could be rolled out across the entire Chinese armed forces and police. The stock ticked half a penny better to 56p.
The last few months have been very volatile for Equator Exploration, an AIM-listed oil and gas exploration group with assets in West Africa. Takeover talk has done the rounds a couple of times in the recent past but yesterday's confirmation that the group has now received an approach was met with little enthusiasm by traders. Amazingly, the shares closed 2p worse at 77p, having traded 14.75p better earlier in the session.
Fund management group Amvescap managed to find someone to take its stake in the struggling lottery operator Chariot off its hands, although Amvescap is likely to have taken a large write-down on the sale. It sold more than 7 million shares at just half a penny each. Surprisingly, the shares rallied significantly on the news, presumably because Amvescap managed to find a buyer, later revealed to be Astinway, which now holds 25.1 per cent of the stock. Chariot closed 0.33p firmer at 0.75p.
Finally, IFR Capital enjoyed a good start to life as a quoted company. The stock is currently a cash shell and will target small and mid-size acquisitions in the European food industry. It raised €135m in an institutional placing by ACP Capital, the company's main shareholder, at €1 per share. The stock closed at €1.03 as almost 10 million shares changed hands.
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