Market Report: ABF flavour of the day thanks to sugar outlook
Thursday 17 March 2011
There was a renewed appetite for Associated British Foods yesterday as analysts turned sweet on the group, arguing investors have missed how much of a boost it will get from sugar.
The world's second largest producer of the commodity advanced 9.5p to 949.5p after Credit Suisse upgraded its rating to "outperform", saying "the market seems to have ignored the huge hike in sugar prices around the world".
Pointing out that ABF has been the blue-chip index's weakest stock in 2011, its analysts said fundamental changes in the sugar market "should mean a rethink on ABF", adding that the group is "in the right market, with the right assets at the right time".
ABF, which also owns the clothing chain Primark, has been harmed recently along with the rest of the retailers by the increased cost of cotton, but Credit Suisse said "all the rhetoric and concerns about the Primark margin are of small significance for ABF's earnings when compared with movements in the world sugar price".
Analysts from Collins Stewart were similarly positive, starting their coverage of the group with a "buy" recommendation. Praising the ingredients companies generally, they said the sector operates "in a favourable environment with sales growth and profitability ahead of the market and food producer averages".
"Companies which have built dominant positions in attractive niche areas of the market and are now focused on margin improvement should be the first to return value to shareholders at long last," they added, choosing ABF as one of their favoured plays.
Overall, it was another day in the red – the sixth in a row – for the FTSE 100, as it was knocked back 97.05 points to 5,598.23. Events in Japan, North Africa and the Middle East continued to worry investors, while disappointing economic data from both the UK and the US added to their concerns.
Attention was also refocused on the economic health of the eurozone thanks to the decision by Moody's to cut Portugal's credit rating to A3 from A1. Many of the banks were left weaker, with Barclays and Lloyds Banking Group declining 10p to 282p and 0.93p to 59.45p respectively. HSBC was also down, 23.5p behind at 622.5p, as it went ex-dividend along with Standard Life, which was 11.2p lower at 199.5p.
Rumour mongers had something to excite them, however, with vague speculation spreading that the Belgian giant Anheuser-Busch InBev (ABI) could be considering a potential merger with the Grolsch-brewer SAB Miller.
Market voices responded cautiously to the chitter-chatter, pointing out that ABI has other issues on its plate, although Atif Latif, director of trading at Guardian Stockbrokers, said that if such a deal did materialise it would allow the group "to gain exposure to Africa and Latin America [where growth is still strong] and counteract the slow growth of the US market". However, despite the gossip, SAB Miller failed to catch light, edging up just 1p to 1,984.5p.
The tragedy in Japan continued to knock Arm Holdings over worries about its production, and the chip maker retreated 13.5p to 504p. Its mid-tier rival, Imagination Technologies, retreated even further, closing 31.8p worse off at 430.8p, after analysts criticised the group for not upgrading its estimates enough in its interim management statement.
At the other end, Hansen Transmissions – which has seen its share price rise as investors look for renewable energy options rather than considering nuclear power operators – was still moving up, increasing 2.03p to 48.94p. The favourable breeze behind the wind turbine gearbox manufacturer was given extra impetus by Peel Hunt's Andrew Shepherd-Barron initiating coverage with a "buy" rating.
A couple of big staffing changes were spooking investors; one of these took place at InterContinental Hotels, which slipped back 27p to 1,228p after announcing that its chief executive, Andrew Cosslett, is to leave at the end of June. Evolution Securities' Nigel Parson, who praised Mr Cosslett for his stewardship of the group, said the "market will be disappointed at [his] departure but he has a good sense of timing".
The analyst was less charitable, however, about the resignation of Mitchells & Butlers' chief executive, Adam Fowle, saying the "soap-opera that is M&B continues to run and run". The pubs group said it had not chosen a permanent replacement yet, and retreated 10.2p to 289.3p.
Back on the top-tier index, Tullow Oil was driven up 6p to 1,355p as investors had their first chance to react to the announcement on Tuesday evening that it had finally gained approval from the Ugandan government for its project in the country.
Down on the fledgling index, the fashion group French Connection was lifted 4.25p to 124p after revealing it had managed to achieve pre-tax profits of £7.3m. The annual sum was dramatically up from the £700,000 it posted in 2009, although the retailer's same-store sales dropped in the UK, Europe and the United States.
- 1 I've been called an abusive and dangerous parent, when all I did was listen to my transgender child
- 2 Migrant crisis: Greek soldier saved 20 people singlehandedly off Rhodes beach
- 3 Sofyen Belamouadden murder: The inside story of a crime that horrified Britain
- 4 Company breaks open Apple Watch to discover what it says is 'planned obsolescence'
- 5 UK weather: Britain braced for snow as arctic air mass moves in
Migrant crisis: Greek soldier saved 20 people singlehandedly off Rhodes beach
Russian hack of President Obama's emails worse than previously admitted
Aaron and Melissa Klein: Oregon anti-gay bakers ordered to pay $135,000 after refusing to make cake for same-sex wedding
UK weather: Britain braced for snow as arctic air mass moves in
Nepal earthquake: US Pastor Tony Miano sparks outcry by suggesting Nepalis should convert and not rebuild their 'pagan shrines'
General Election 2015: Chuka Umunna on the benefits of immigration, humility – and his leader Ed Miliband
The sickening truth about food banks that the Tories don't want you to know
Migrant boat disaster: Ukip candidate mocks victims in sickening Twitter post
Nigel Farage wants the BBC to stop making programmes like Doctor Who, Strictly Come Dancing, and Top Gear
Global warming: Scientists say temperatures could rise by 6C by 2100 and call for action ahead of UN meeting in Paris
General Election 2015: Britain would become a 'communist dictatorship' under Ed Miliband and Nicola Sturgeon, claims wife of Michael Gove
iJobs Money & Business
£20000 - £22500 per annum + OTE £30K: SThree: SThree Group have been well esta...
£24000 - £26000 per annum + benefits : Ashdown Group: A highly successful, glo...
£50000 - £55000 per annum: Ashdown Group: Business Analyst - Financial Service...
£18000 - £23000 per annum + OTE £45K: SThree: At SThree, we like to be differe...