Market Report: Brokers build case for Wolseley on management

Wolseley attempted a comeback last night as traders looked beyond the recent spate of negative news on the macroeconomic front.

The building materials group has extensive operations on the other side of the Atlantic and has suffered as the bears seized on the spate of grim economic data out of the US in recent weeks. But the bulls returned to the stock last night, capitalising on a slide of about 20 per cent since the beginning of June, after the analysts at Numis argued that the sell-off had been overdone. The broker said investors should pay closer attention to Wolseley's "self help" initiatives, with the benefits of the company's cost-cutting drive, management's focus margins and actions on underperforming divisions likely to drive earnings estimates over this year and the next.

"In out view, full-year results [in September] are likely to continue to show benefits of management actions, a strengthened balance sheet and an update on the management plan set out by chief executive Ian Meakins," Numis said, aiding the stock's rise to 1,306p, up 26p. "While macro uncertainty is unlikely to go away in the short term, this needs to be put in context, relative to management actions, which we believe will be the major driver of profit recovery."



overall, the markets rallied, with the FTSE 100 rising by 39.56 points to 5,234.84 and the FTSE 250 closing at 9,826.15, up 65 points. The mining sector was broadly firm, with investors buying in on the back of firmer commodity markets and an inconclusive election in Australia. There were hopes that a change of guard and the installment of a minority conservative government down under would lead to the scrapping of the planned tax on mining profits. The prospect aided the likes of Rio Tinto, which was 18.5p better off at 3,350p, and BHP Billiton, which rose by 9p to 1,830p as the board of Canada's Potash Corporation urged shareholders to turn down its hostile bid.

Old Mutual was in focus following confirmation of talks with HSBC, up 5p at 639.2p, which is looking to acquire up to 70 per cent of Nedbank. Old Mutual owns a majority stake in the South African lender, and rose by 3.9p to 124.9p on the news. Though cautious on the prospects for regulatory approval of the deal, UBS said the sale of Old Mutual's stake would be "a positive step in the continuing simplification" of the insurance group.

"The resultant OML group would become an attractive takeout target for global life insurers looking for emerging market presence," the broker said, reiterating its "buy" view and 155p target price for the stock. In the wider sector, consolidation hopes drove Aviva to 391.2p, up 13.5p, while Standard Life gained 4.5p to 206.6p as the bulls piled in.

Elsewhere, the drinks giant SABMiller attracted interest, rising by 30.5p to 1,881.5p, amid reports that it was eyeing the Foster's beer business. Japan's Asahi Breweries was also said to be interested, but analysts played down the prospects, arguing that bids were more likely after next year's demerger of the Australian group's beer and wine businesses. Canada's Molson Coors and Coca-Cola Amatil were also mentioned as potential suitors for the beer arm.

Further afield, Dana Petroleum held steady, closing at 1,803p, up 5p, as the market awaited further developments in the Korea National Oil Corporation's hostile bid for the group. Knoc is offering 1,800p per share – a "good price" for the oil prospector's assets, according to Citigroup. The broker said it expected Dana management, which was reported to be seeking a higher offer in return for its backing, to "come out fighting" when the mid-cap groups issues its half-yearly figures later this week.

ITV continued to attract its share of bid rumours. Last week, the broadcaster was mentioned as a target for an American suitor last week, but last night the focus was on the possibility of interest from Europe. No names were mooted, but ITV has been linked to Italy's Mediaset in the past. Recent chatter of possible stake-building by the NBC network took a back seat as the shares, supported by bid hopes, gained 2.15p to 56.65p.

On the downside, the engineering group Charter International fell to 607p, down 15p, after Panmure Gordon revised its view to "hold" from "buy". The broker said it had been too optimistic on the rate of near-term recovery at Charter's Howden air and gas handling equipment division. "The order bounce enjoyed in the first quarter has lost momentum and we now forecast a shortfall of revenues for 2011," Panmure said, adjusting its earnings estimates and scaling back its target price for the stock to 770p from 1,010p.



there were no takers for Speedy Hire, the tool hire firm whose shares continued to retreat last night, falling by 0.25p to 20.75p despite a push from Evolution. The broker told clients that, following last week's declines, the stock was "discounting a triple dip" scenario. "Even before last week's drop, Speedy's share price was discounting a nasty double dip," the broker said, adding: "We think the dire scenario that is priced into Speedy's shares is overplayed."

Suggested Topics
Start your day with The Independent, sign up for daily news emails
Arts and Entertainment
filmPoldark production team claims innocence of viewers' ab frenzy
Life and Style
Google marks the 81st anniversary of the Loch Ness Monster's most famous photograph
techIt's the 81st anniversary of THAT iconic photograph
News
Katie Hopkins makes a living out of courting controversy
people
News
General Election
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Guru Careers: Pricing Analyst

£30 - 35k (DOE): Guru Careers: We are seeking a Pricing Analyst with experienc...

Ashdown Group: Treasury Assistant - Accounts Assistant - London, Old Street

£24000 - £26000 per annum + benefits : Ashdown Group: A highly successful, glo...

Ashdown Group: Sales Team Leader - Wakefield, West Yorkshire

£21000 - £24000 per annum: Ashdown Group: The Ashdown Group has been engaged b...

Ashdown Group: Head of Client Services - City of London, Old Street

£45000 - £50000 per annum + benefits : Ashdown Group: A highly successful, int...

Day In a Page

Revealed: Why Mohammed Emwazi chose the 'safe option' of fighting for Isis, rather than following his friends to al-Shabaab in Somalia

Why Mohammed Emwazi chose Isis

His friends were betrayed and killed by al-Shabaab
'The solution can never be to impassively watch on while desperate people drown'
An open letter to David Cameron: Building fortress Europe has had deadly results

Open letter to David Cameron

Building the walls of fortress Europe has had deadly results
Tory candidates' tweets not as 'spontaneous' as they seem - you don't say!

You don't say!

Tory candidates' election tweets not as 'spontaneous' as they appear
Mubi: Netflix for people who want to stop just watching trash

So what is Mubi?

Netflix for people who want to stop just watching trash all the time
The impossible job: how to follow Kevin Spacey?

The hardest job in theatre?

How to follow Kevin Spacey
Armenian genocide: To continue to deny the truth of this mass human cruelty is close to a criminal lie

Armenian genocide and the 'good Turks'

To continue to deny the truth of this mass human cruelty is close to a criminal lie
Lou Reed: The truth about the singer's upbringing beyond the biographers' and memoirists' myths

'Lou needed care, but what he got was ECT'

The truth about the singer's upbringing beyond
Migrant boat disaster: This human tragedy has been brewing for four years and EU states can't say they were not warned

This human tragedy has been brewing for years

EU states can't say they were not warned
Women's sportswear: From tackling a marathon to a jog in the park, the right kit can help

Women's sportswear

From tackling a marathon to a jog in the park, the right kit can help
Hillary Clinton's outfits will be as important as her policies in her presidential bid

Clinton's clothes

Like it or not, her outfits will be as important as her policies
NHS struggling to monitor the safety and efficacy of its services outsourced to private providers

Who's monitoring the outsourced NHS services?

A report finds that private firms are not being properly assessed for their quality of care
Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

The Tory MP said he did not want to stand again unless his party's manifesto ruled out a third runway. But he's doing so. Watch this space
How do Greek voters feel about Syriza's backtracking on its anti-austerity pledge?

How do Greeks feel about Syriza?

Five voters from different backgrounds tell us what they expect from Syriza's charismatic leader Alexis Tsipras
From Iraq to Libya and Syria: The wars that come back to haunt us

The wars that come back to haunt us

David Cameron should not escape blame for his role in conflicts that are still raging, argues Patrick Cockburn
Sam Baker and Lauren Laverne: Too busy to surf? Head to The Pool

Too busy to surf? Head to The Pool

A new website is trying to declutter the internet to help busy women. Holly Williams meets the founders