Market Report: Changes starting to work at SuperGroup

 

The share price of the retailer once nicknamed Superdroop started to perk up yesterday. SuperGroup's shares topped the mid-cap index when punters followed the advice in a buy note from the fashion followers at Investec.

SuperGroup, owner of the clothing brand Superdry, has had a turbulent time since its shares listed in 2010 at 500p. But Bethany Hocking at Investec said she thought its "past is overshadowing the considerable changes that have taken place" at the hoodies-and-jeans retailer and "more importantly, the significant future growth opportunities".

Investec thinks the development of its product ranges including "womenswear, beauty, jeans and underwear" will help it to grow. Its new management – in place for nearly a year – is also a reason to be interested, Investec claims. The "revitalised senior team" of chief financial officer Shaun Wills and chief operating officer Susanne Given means the retailer has the "capacity to support sustainable and profitable growth".

The appointment of a head of international "is a key piece of news", Investec thinks, as it predicts that international and online revenues will achieve 30 per cent annual growth rates between 2012 and 2015, and will "account for over half of group sales by 2015".

The shares sashayed up 38.5p to 644p. Investec gave them a 843p target price.

SuperGroup might be living up to its name, but the rest of the stock market dropped after Tuesday's exuberance. The blue-chip index was dragged down by stocks going ex-dividend. Investors also succumbed to their concerns for the eurozone. Alastair McCaig, market analyst at IG, said the market had a "reality check" following various updates on the situation in Cyprus and news that the Portuguese Prime Minister is facing his fourth vote of no-confidence. The FTSE 100 lost 70.38 points and closed at 6,420.28 – wiping out nearly all of the previous day's gains.

News that the US telecoms group Verizon had denied it was in talks with AT&T about a bid for Vodafone pushed the mobile giant down 5.85p to 186.15p.

Recent bid speculation surrounding Marks & Spencer was also dismissed by analysts at Espirito Santo, who claimed that the recent share price move had been "unjustified" and that a bid for the retailer was "unlikely".

Over the past two weeks the high street bellwether's shares gained about 10 per cent on rumours and reports that the Qatari Investment Authority was considering a bid. But Espirito's team "do not see M&S as an attractive bid candidate" because "improvement in profits is difficult to achieve without investment".

Espirito rates the shares a sell with a 310p price target. The shares were down 1.5p to 392p. Not only does Espirito think a takeover is unlikely, but also it claims that M&S's fourth-quarter trading update next week is likely to be disappointing.

Meanwhile the miner Vedanta Resources was 17p better off at 1,009p on news that it had won its appeal over the closure of its copper smelter in India. It has been fined 1bn rupees (£12m) for pollution in Tamil Nadu, but will not be forced to close.

Rumours that Vedanta's Bombay-listed Cairn India could make an offer for Cairn Energy have also been doing the rounds for weeks. A note from Jefferies said Cairn Energy was likely to benefit from drilling programmes this year, and rated it a buy with a 385p target, lifting it 4.8p to 275.7p.

Another rumour still doing the rounds after murmurs last week concerned the baggage handler and support group Babcock International's interest in the Aim-listed decontamination and environment expert Silverdell. Yesterday Babcock updated the market on trading and said new contracts including running baggage handling at Heathrow would help it to meet City expectations for the year to April.

Some traders speculated that Babcock could be interested in Silverdell, which has been expanding in Canada since it bought Environmental Support Services last year and won a contract from Hydro Québec, Canada's largest electricity generator, earlier this year. But the shares were moving in the wrong direction: Silverdell down 0.38p to 16.63p, and Babcock losing 10p to 1,093p.

Back on the mid-cap index, the supermarket group Ocado received a downgrade from HSBC, which moved its rating to underweight, and the shares lost 11.1p to 148.3p.

The neuro-diagnostics specialist Electrical Geodesics blinded investors with science on its arrival on Aim yesterday. The company, which works on techniques to detect electrical abnormalities in the brain associated with seizures, raised £8m and listed at 120p a share. The stock closed up 4 per cent on its first day at 125p.

Buy

Antrim Energy

Snap up shares in Antrim, Peel Hunt recommends. The broker thinks the Canadian-based oil and gas explorer is "an attractive speculative buying opportunity". The company has discontinued all planning work in the Fyne oilfield and the resulting net asset value is 29p per share (Peel's target price), so with the shares at 10.25p, you'd be mad not to pile in.

Sell

Balfour Beatty

Don't build your hopes on Balfour Beatty, is Investec's message. The broker, in a note headed "I just don't know what to do with myself", says the market has "caught up with" the construction group and challenging conditions are set to continue. The shares are 231.6p, with a 190p target.

Hold

Gem Diamonds

Hang on to shares in Gem, Panmure Gordon advises, galvanised by the news that the chief financial officer, Kevin Burford, has stepped down at the diamond producer. His replacement, Michael Michael, has been group financial manager at the business since 2008, so "transition is likely to be seamless". The shares are 133.25p, with a 186p target.

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