Market Report: Asset sales and bid talk drive BP to the summit
Wednesday 15 December 2010
A number of factors conspired to land BP at the top of the blue chip index last night, with a sale of assets by the company and positive analyst comments topped off by talk of it being a potential takeover target.
The oil giant reached pole position after making 14.75p to 473.1p, with market gossips occupied for most of the day by speculation that Royal Dutch Shell is considering making a play for the company, a scenario described by one trader as "poppycock".
Chatter emerged later in the session that Exxon Mobil – which has been previously linked with the group – isanother supposedly interested party. According to the vague tittle-tattle, as well as looking at a bid of around £7-a-share, both Exxon and Shell are starting to build up a stake in BP.
However, many were instead attributing the rise to BP getting rid of a number of assets in Pakistan for a better price than expected, as well as some upbeat broker coverage.
The company announced that it is getting $775m (£490.6m) from United Energy Group for the oil and gas units, with the money going towards paying for the fallout from the Gulf of Mexico oil spill, which is expected to cost the company $40bn.
BP was also helped by Credit Suisse, which reiterated the stock as its "top pick for long-term investors". The broker's analysts raised its target price to 585p from 515p, although Jefferies was less keen, initiating coverage with a "hold" recommendation.
Overall, the FTSE 100 ended up 30.46 points better off to close on 5,891.21, leaving those who believe it will breach 6,000 by the end of the year still living in hope.
There was some vital economic data to be analysed either side of midday. Although the announcement that consumer inflation had risen to 3.3 per cent was a disappointment, the afternoon brought better news as figures from the States showed retail sales inNovember were up again.
Elsewhere, Whitbread finished at the foot of the index after sitting there for most of the day. The owner of Premier Inn and Costa Coffee dropped,despite forecasting strong growth in its trading update.
Execution Noble's analyst Alistair Macdonald – who has the company on a "buy" recommendation – said the latest update "should reassure the market that the improved trading remains on track", but instead Whitbread fell 50p to 1,740p.
Meanwhile, takeover talk boosted Scottish & Southern Energy up 14p to 1,150p as vague rumours continued to swirl around the energy supplier.
Topping the FTSE 250 was Imagination Technologies after the chip maker released its first-half results, and – as predicted by analysts – the company took the opportunity to announce an acquisition. However, unlike when Imagination revealed its $47m deal to buy HelloSoft last November, this time investors reacted more positively and pushed it up 20.5p to 380p.
The group will spend $27m on Caustic Graphics, an American company that specialises in 3D graphics. Imagination hopes the deal will enable it to develop the technology for mobile phone manufacturers.
Meanwhile, Carpetright was looking rather shabby, as it shed 1.76p to 14p thanks to interim results which were cautious on the group's prospects for 2011. The carpet retailer revealed that its first-half profit had fallen nearly 30 per cent, and its finance director added that recent disappointing mortgage data has had "a knock-on impact through the rest of the housing chain at the moment".
Still, at least one of the richest men in the world believes in it; it wasrevealed late on Monday that Bill Gates has upped its stake in the company to 6 per cent.
Betfair's bad week continued, with the gambling company – which is about to join the FTSE 250 – retreating 191p to 990p, after it lost over 4 per cent on Monday. Its half-year earnings failed to match expectations, and the company now trades at well below 1300p, the price at which shares were sold when it floated in October.
Among the small-caps, Hardy Underwriting eased back 9p to 273p after its rival Beazley abandoned its attempt to buy the Lloyd's of London insurer. Beazley has given up on the deal following the refusal of its final offer of up to 350p-a-share.
Execution Noble said that, given the refusal, it expects Hardy's management to "come under pressure todeliver quickly on their growth strategy given that Beazley's final offer comes in at around 1.25 times 2010estimated tangible book value".
Meanwhile, Renovo – which develops scar reduction drugs – made a small gain of 0.25p to finish on 48p after the announcement of its preliminaryresults. Analysing the numbers, Peel Hunt's Paul Cuddon said that the biotech company is "well positioned" thanks to "plenty of cash, a world class IP platform in wound healing and a drug [Juvista] nearing the end of its first Phase 3 trial in a potentially lucrative market."
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