Market Report: Bid talk and placing hopes power Liberty
Thursday 19 February 2009
Liberty International shrugged off fresh losses in the commercial property sector last night, rising to the top of the blue-chip index amid a spot of bid chatter and talk that, instead of launching a rights issue, the group might bolster its finances by placing shares with certain large shareholders.
The rally came as the smaller peer Brixton, 14 per cent or 6.75p behind at 41.25p, and Segro, down 1.14 per cent or 1.25p at 108.75p, recorded fresh losses after revealing they were considering going to shareholders for extra funds.
Traders and analysts spoke of worries – first aired on Tuesday – that there may not be enough support for further rights issues in the sector, which has already seen cash-call announcements from Hammerson, 2.63 per cent or 9.25p lighter at 342p, and British Land, down 2.4 per cent or 10.5p at 426.25p. Some expect Land Securities, down 0.5p at 568p, to go down the same route today.
One analyst said that if Liberty can place stock with large shareholders like Sir Donald Gordon, America’s Simon Property Group and Australia’s Westfield, it may raise enough funds to avoid a rights issue, and may thereby avoid the risk. Traders agreed, saying that the market would probably welcome news of a placing.
Besides hopes that the group may be able to refinance with help of large shareholders, Liberty also benefited from renewed speculation that Simon Property Group was mulling |a bid.
The chatter has been around before and helped take the stock up 5.56 per cent or 19.2p to 365.25p.
The FTSE 100 fell below the 4,000-point mark again, but recovered to 4,006.83, down 27.3 points at the close.
The FTSE 250 was also weak, retreating 52.69 to 6,213.02, as investors sold out of mid-cap stocks.
Standard Chartered, which lost almost 9 per cent of its value in the session before, was hit again last night, shedding 20p, or almost 3 per cent, to 690p after ING commenced coverage of the stock with a “sell” recommendation. “We forecast a 7 per cent decline [in income] in 2008, following growth at an increasing multiple of global gross domestic product since 2003. Wholesale banking could be hardest hit as we believe much of its recent growth is perishable,” the broker said, adding that the probable level of bad debts weren’t yet priced in to the international banking group’s stock.
Royal Bank of Scotland was the weakest in the sector, down 12.56 per cent or 2.6p at 18.1p, following reports that the group may have to pay up to £8bn in fees if wants to put around £200bn of toxic assets in |the Government’s asset protection scheme, the details of which are expected next week.
The estimate, which sparked worries about how RBS would service the bill, was calculated on the basis of a 4 per cent fee, although Credit Suisse suggested the Government may charge less – possibly around 3 per cent of the total value of assets put into the scheme.
The broker added that in any case a meaningful analysis of the likely impact of the scheme was only possible with all the details, including more information on factors like whether the Government will demand payment up front or if the charges will be spread over a couple of years.
“Our point is [that] the overall detail of the scheme remains absolutely key to the future direction of bank share prices,” the broker said.
“Looking at one single component, like the fee, is pointless.”
Elsewhere, Legal & General, which firmed after the insurer issued an update on its capital position on Tuesday, fell back, losing 11.7 per cent or 5.3p to 40p, as the recovery fizzled out.
Earlier, the group had said that, following recent equity market falls and after making higher bond default assumptions, its regulatory capital surplus stood at more than £1.6bn at the last year, down from around £2.9bn.
Some analysts remained concerned, with JP Morgan warning investors to “expect rating downgrades on liability risks”.
On the upside, Mecom, the European media group, gained 22.22 per cent or 0.6p to 3.3p as investors welcomed news that the company had agreed to sell two Norwegian newspapers to Polaris Media for an enterprise value of about £55.9m.
The mobile banking firm Monitise surged to 4.75p, up 35.71 per cent or 1.25p, after the company was awarded a patent for its core mobile banking and payments platform.
European Nickel, up almost 83 per cent or 2.47p at 5.45p, was also strong after securing approval of the forestry permit for its Caldag nickel project in Turkey.
The Ambrian analyst Nick Mellor said the approval was “fantastic news” for the company, which has been waiting for a permit since June 2006.
“Looking forward, the next milestone for European Nickel will be financing and construction,” Mr Mellor said.
“Funding this will by no means be easy; we believe that on top of traditional bank debt options, the company may well be able to draw joint venture industry partners to assist with fundraising.”
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