Market Report: Aggreko gains as bulls eye 'powerful potential'
Thursday 27 January 2011
Aggreko shot up to pole position as the blue chips shrugged off the weakness in the UK economy to stage a comeback last night.
The temporary-power provider ended with gains of more than 5 per cent, up 75p at 1,485p, after Goldman Sachs advised clients to pile in, highlighting the firm's "powerful potential". The broker's enthusiasm was fired by by the company's promising international power projects division, which provides temporary power stations around the world.
"We believe Aggreko will benefit from structural growth in its profitable international power projects business as power shortages in developing companies drive further demand for temporary power," Goldman said, echoing the view of other Aggreko bulls.
Adopting a "buy" view on the stock, the broker added that other parts of the company should draw steam from the economic recovery, particularly in North America, "which we estimate contributes about 20 per cent of group revenues".
Overall, the trials of the UK economy were far from traders' minds as investors switched their attention to the world's largest economy, helping to lift the FTSE 100 by 51.5 points to 5,969.21 and the FTSE 250 by 110.67 points to 11,612.27. In his set-piece State of the Union address this week, President Barack Obama called for lower corporate taxes in the US, boosting confidence in the country's prospects of recovery.
The benchmark index also received a shot in the arm from the US dollar, which eased ahead of a policy announcement from the US Federal Reserve. The pull-back pushed up commodity prices, as dollar-denominated metals became more attractive for overseas buyers.
Firm metals prices thus provided the perfect setting for a mining sector rebound, with Antofagasta climbing by more than 3 per cent, or 46p, to 1,436p. Kazakhmys, which was among the weakest on Tuesday, also did well, climbing by 33p to 1,533p. Of the others, Anglo American and Rio Tinto gained 80.5p to 3,155.5p and 110p to 4,400p respectively.
Xstrata was also higher, rising by 19p to 1,411p as speculation continued over the possible listing of Glencore, the commodities trader which owns about 35 per of the Anglo Swiss miner.
Liberum Capital analysts suggested that the trading house could be worth about $60bn (£38bn), a valuation which, if it comes about following a London listing, would place Glencore among the FTSE 100's top 15 companies.
BG was the strongest of the oil issues, rising by 45p to 1,372p as investors welcomed news that Petrobras, the UK group's partner in the Carioca area offshore Brazil, had made a new oil find. While BG rose, its smaller peer Heritage Oil slumped, sliding by nearly 30 per cent, after announcing a giant gas find in the Kurdistan region of Iraq.
The news disappointed the market, which had been hoping for the discovery of oil instead. "Clearly it is more challenging to monetise a gas discovery rather than [an] oil discovery in Kurdistan," the analysts at JP Morgan Cazenove said.
The broker did add that the receipt of requisite approvals from local authorities, coupled with an investment decision on an important gas pipeline, might mean that Heritage "could start selling gas into profitable European markets by 2015-16". Disheartened investors still pressed the sell button, leaving Heritage at 310p, down 126.6p.
Elsewhere, Premier Foods, the food producer which announced plans to trim its debt burden by agreeing the sale of its Quorn meat-free business earlier this week, shot up by nearly 8 per cent, more than making up the ground lost on Tuesday.
The stock gained 1.6p to 22.3p against the backdrop of recent reports that Premier was in advanced talks to offload its canning operations to a division of Japan's Mitsubishi Corp.
Like the wider market, housing stocks also enjoyed a rebound. The gains came despite new data showing that UK mortgage approvals had declined to their lowest level in nearly two years in December.
Ignoring the grim figures, Taylor Wimpey rose by 1.13p to 36.99p, while Barratt Developments gained 2.75p to 98.3p. Bellway was also higher, adding 6.5p to 649.5p.
Blacks Leisure took a beating, slumping by 9.1 per cent as investors digested news that offer talks had ended.
The operator of the Blacks Outdoor and Millets chains said that, while it had received a number of indicative proposals for all or part of its business, none had proved "sufficiently compelling" to warrant pursuing further.
"The board has therefore terminated these discussions to allow management to focus on completing the final stage of the turnaround plan," it said, triggering a sell-off that left its shares at 35.5p, down 3.5p, by the close. Earlier, they struck a session low of 33.5p.
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