Market Report: Analysts praise 'safe' African Barrick Gold
Saturday 26 March 2011
Investors left African Barrick Gold (ABG)glittering last night after the miner released a positive drilling update and was praised as a "safer" option for those wanting exposure to the recent strength of the precious metals sector.
The group reached 558.5p during trading, before tracking back and closing at 539p, a gain of 10p. As well as its statement that recent findings could add "considerable value" to its Nyanzaga project in Tanzania, ABG was also given a helping hand by Citigroup, which raised its recommendation to "buy" in a large note on the sector.
Saying that "gold and silver love political tension and a high oil price", its analysts noted that the two commodities – along with high-quality diamonds – have benefited from the "heightened risk-perception" caused by the recent unrest in the Middle East and North Africa and that ABG's "lack of political challenges has made it a 'safer' entry into the gold price upside".
It praised the blue-chip silver producer Fresnillo as well, saying it "offers the best-quality entry to the sector", and its advance of 27p to 1,560p helped the FTSE 100 rise 19.89 points to 5,900.76. The top-tier index has put on over 180 points since Monday, its best weekly gain since last November.
Autonomy missed out on the move after attracting criticism from JP Morgan Cazenove, which described its earnings quality as "poor and deteriorating" and cut its expectations for 2012.
The software company was driven back 56p to 1,586p, finishing in last place on the FTSE 100, despite sentiment in the sector receiving a boost from across the Atlantic where both Oracle and Accenture released impressive figures late on Thursday.
Numis Securities said the results "highlight the attractions of the enterprise software and services sector as a play on strengthened business investment intentions", choosing Fidessa as its "top pick". The financial software group is currently trading at its highest level since 2000, and it was bumped up another 22p to 1,754p.
Traders said Oracle's comments on an increase in demand for cloud computing should benefit TeleCity, which added 12p to 495p. Royal Bank of Scotland's John King pointed to another set of results as a positive sign for the data centres group, this time from its Dutch peer InterXion whose figures, the analyst said, reaffirm his belief that "supply conditions and hence pricing will remain favourable this year".
Despite finishing in pole position on the top-tier index after climbing 11.9p to 353.1p, Invensys was still weaker than before Thursday's announcement of the surprise departure of its chief executive Ulf Henriksson. Evolution Securities broadly welcomed his replacement Wayne Edmunds, describing him as "the driving force behind resolving" its pension liability. "We strongly believe that a form of resolution on the pension," said its analyst Harry Philips, "will lead to the value of the business... being realised either organically or through corporate activity."
Another group being discussed as a bid target was GKN, which revealed its own departure earlier in the week, as it was lifted up 3.9p to 198p. Its chief executive Kevin Smith is retiring at the end of the year, and market voices said the change could draw attention to its takeover potential.
Just behind it was Reckitt Benckiser, which advanced 96p to 3,160p after the group was upgraded to "buy" by Bank of America Merrill Lynch, with the broker saying its "conservative guidance and prospect of generics entry is fully reflected in the share price which now offer attractive value".
Also seeing a small rise was BP – 2.65p stronger at 483.55p – despite the decision late on Tuesday by an arbitration tribunal in Stockholm to block its venture with Rosneft over objections by the oil giant's partners in the TNK-BP venture, AAR.
Analysts from Citigroup described it as a "setback... not only because of its inability to complete on a potentially important exploration opportunity in the Arctic, but because it looks to have weakened the shareholder alliance in TNK-BP".
Down among the small-caps, 888 booked gains of 4.25p to close at 44.5p following its tie-up with the US casino group Caesars Interactive Entertainment getting the green light from the Nevada Gaming Commission. Shore Capital said the news "represents further encouraging momentum in the re-appraisal of online gambling in the US by regulators, with the regulation of [it] now looking increasingly likely".
Meanwhile there was vague speculation that it could help the prospect of 888 receiving a formal bid from Ladbrokes; the two announced they were in preliminary discussions last December, but neither has commented recently on the progress of the talks.
The struggling retailer HMV jumped up 0.75p to 17.5p after the group revealed it was considering a break-up. There has been talk for a while that it could sell its Waterstones unit, and yesterday it announced it was "exploring strategic options" for the book chain as well as HMV Canada.
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