Market Report: BT looks bright but market still gloomy
Wednesday 21 August 2013
Punters were dialling up their brokers yesterday to buy into BT as regulator Ofcom published proposals that could make the UK telecoms giant £150m better off. Ofcom said it had found errors in how the charges were calculated and yesterday republished the price controls for 2014 to 2017 for line rental access to the telephone exchanges.
Analysts at Jefferies said Ofcom's proposals are now "more benign" and could mean another £50m in earnings in 2014 which could reach £150m by 2016/2017.
Not only were the better pricing rules good news for BT, but Jefferies' Giles Thorne and his team said last week's TV wholesale deal with Virgin Media – whereby BT's new sports channels will available to Virgin customers – is also a big boost for the group. Jefferies rated BT a buy with a 385p price target and said the "two recent developments offer upside to forecasts". The shares were called up 6p to 328.2p. The group yesterday also confirmed the start date for Gavin Patterson, the new chief executive to replace Ian Livingston, who is joining government in the role of Minister of State for Trade and Investment. Lord Livingston will stand down on 10 September.
Joining BT in the top three risers on the benchmark index, the broadcaster ITV got a boost from analysts at Morgan Stanley, who raised their target price to 185p, up from 175p. Morgan Stanley said ITV will benefit from the "potential UK advertising upswing on the back of an improving economy" and they revised their earnings forecast for the group that was 2.9p brighter at 161.9p.
The wider market continued its downward spiral as traders worried the end of monetary stimulus in the US would be signalled in today's minutes from the Federal Reserve's last rate-setting meeting. The FTSE 100 slumped during the day but recovered some of this fall and finished off 12.27 points at 6453.46.
The energy services group John Wood reported first-half profits up 17 per cent but it took the wooden spoon on the blue chips as it cut the profit outlook at its engineering division. It was 72p worse off at 831p.
Also among the worst performers was cement specialist CRH, off 32p to 1,394p. Its first-half results revealed a pre-tax loss of €71m. But analysts at Investec said that although the results were "somewhat disappointing", CRH is "attractive as an operationally geared play on the US". The shares were also said to have suffered following a wider construction sector sell-off on Monday that hit peers and dragged CRH down yesterday.
Over on the mid cap index a Scottish submarine rescuer became the place to sink cash as the rest of the market looked decidedly choppy. Marine services group James Fisher & Sons topped the mid-tier league table as it reported a 15 per cent jump in its first-half results to £19.4m, with sales up 7 per cent to £200.7m.
It got the thumbs-up from analysts at Investec and news of its profit rise, a sell-off of a boat business and a purchase of an underwater engineering outfit, got the rest of the City hooked.
Investec's John Lawson increased his rating to buy and said the marine engineer specialist "is benefiting from strong market conditions… around the world". He raised his target price to 1,085p and shares spurted 5.8 per cent – up 58.5p to 1,057p.
Cineworld has been ordered to sell three cinemas by the Competition Commission after its takeover of the arthouse Picturehouse chain. But yesterday it just lost 7p to 397.25p.
Industrial metals-maker Fiberweb advanced 5.25p to 92.75p on news of a takeover bid from Polymer Group. Polymer has until 17 September to make a formal offer or walk away.
Sports drinks-maker Science in Sport (Chris Hoy is a brand ambassador) floated on Aim earlier this month. Yesterday it emerged Richard Harpin, savvy investor and Homeserve chief executive, has bought a 3.9 per cent stake. Science was steady at 64.25p after floating at 56p.
Oil explorer Faroe Petroleum said it has agreed a deal for two oil companies to farm its licences in the Norwegian Sea to help it pay costs on another well, but it sank 4.5p to 129.25p.
Vague bid rumours that a private equity group is taking a look at Goals Soccer Centres helped the five-a-side specialist score a 1.5p gain to 158p. Last year a £73.1m bid from the Ontario Teachers' Pension Plan failed to get shareholder approval and the takeover deal collapsed.
Renewable energy tiddler Kedco updated shareholders on its working capital and a wind farm and biomass project, and it produced a 0.11p gain to 0.575p.
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