Market Report: Troubled Misys hardens on broker upgrade

Click to follow
The Independent Online

It has been a strange six months for the software group Misys. Back in October, Kevin Lomax, the founder and chief executive, was forced to resign after failing to make a high enough bid for the company. His resignation came with a profit warning and the group has warned twice since then.

Shareholders can be forgiven for wondering if things will ever improve, but Deutsche Bank believes that the recent management restructuring will pay dividends sooner rather than later. The German investment bank upgraded shares in Misys to "buy" from "hold" and upped its target price to 300p, telling clients the market is "willing to overlook " short-term issues in favour of the company's long-term recovery potential. Deutsche Bank expects a positive trading update at the end of March and the broker must be well aware of the old adage about profit warnings - sell on the first, buy on the third. Misys closed 6.5p firmer at 242.5p.

The integrated oil giant BP, 2.5p worse at 536.5p, was out of favour after a bearish note from the broker KBC Peel Hunt, reiterating its "reduce" rating on the shares and cutting its price target to 500p. The broker believes fourth-quarter results, due on 6 February, could show a 12 per cent decline in earnings. The note also dragged Shell 10p lower to 1,706p.

The retail group Kingfisher climbed 4.25p to 239.25p following a bullish update from the broker JP Morgan. The US investment bank believes a revival in the company's fortunes could come sooner than many traders believe as it upgraded the shares to "overweight" and upped its price target to 265p. Traders also blamed a "fat finger trade" for the shares hitting an earlier high of 243.5p.

Investors continued to take some profits in the property sector as a higher interest rate environment dampened traders' enthusiasm for it. Land Securities fell 20p to 2,140p, closely followed by Hammerson, 9p worse at 1,466p and British Land, 10p lower at 1,569p.

Concerns over the US interest rate decision kept most traders on the sidelines for the second consecutive session. The FTSE 100 closed 38.9 worse at 6203.1 with weakness across most sectors.

In the mid caps, talk of a private equity bid for Ladbrokes helped the shares climb 7.75p in early trade before a mild bout of profit-taking saw the shares close 4.25p better at 438.5p. The word is that one of the major European buyout houses is mulling an offer that could value the shares at up to 600p.

Second-line insurance stocks were in focus following a review of the sector by the US investment bank Bear Stearns. The broker cut Amlin to " underperform", sending it 3.5p lower to 305p. Hiscox performed even worse, falling 4.25p to 254p, despite only being downgraded to "peer perform". Most insurance stocks closed in the red, with Omega Insurance shedding 2.5p to 151p. But the word among traders is Omega could return significantly better dividends than are currently being forecast.

Investors are anticipating a lively annual meeting today for Mitchells & Butlers, the bar and pub operator. Robert Tchenguiz, whose 550p-per-share offer for the company was rejected last May, is expected to put pressure on the board to convert to real estate investment trust status. The shares climbed 13p to close at 696p.

A profit warning from F&C Asset Management, 37p worse at 170.75p, failed to knock the stuffing out of the rest of the asset management sector. One trader said: "This is a company-specific issue and the money F&C is losing has to find a new home." Henderson Group nudged 1.25p better to 137.25p, with Schroders 3p firmer at 1,095p.

At the smaller end of the market, talk of a bid for the biotechnology group Oxford Biomedica helped it climb 4p to 43.25p, with the pharmaceutical giants GlaxoSmithKline and Pfizer rumoured to be lining up a bid.

It looks like traders are banking on a formal bid for Commoditrade over the next few days. Market makers reported strong support for the shares with a handful of large buyers looking for stock. Corvus Capital, which owns a 20.9 per cent stake in Commoditrade, was also in demand, 1.25p better at 16p. With Commoditrade firming 2p to 37p, Corvus's stake is worth just over £29m - a significant proportion of its £42m market capitalisation. Corvus is sitting on paper profits of almost £35m from its 10 investments in public companies.

Finally, Autologic, the AIM-listed distributor of motor vehicles, raised £12.1m via a placing at 75p, issued a profit warning and closed 15 per cent better. Full-year operating profit will be "slightly" below market expectations , but lower interest payments and better capital management should produce pre-tax profits well ahead of forecasts. The shares rose 14.25p to 97.75p.