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Market Report: Doorstep lender IPF is victim of a wrong call

Toby Green
Tuesday 11 October 2011 00:00 BST
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Panicked investors were attacked for being too quick to press the "sell" button yesterday, as International Personal Finance (IPF) plummeted towards the foot of the mid-tier index. The doorstep lender shifted down by as much as 13 per cent in the wake of a profits warning from Austrian bank Erste Group, prompting punters to make a connection between the two.

IPF – which focuses on emerging markets, especially in eastern Europe – was knocked back after Erste admitted it was on course to post a huge loss of €800m for the year, thanks mainly to being forced to take a major hit by the Hungarian government on foreign currency loans in the country.

However, scribblers quickly rushed to the defence of IPF, with Numis Securities' James Hamilton pointing out that it was not exposed to the loans in Hungary. He added that therefore there was "no good reason" for the read-across, but although the support helped to lift the group off its session lows, IPF still closed 22.4p, or 8.82 per cent, worse off at 231.5p.

France and Germany's promise over the weekend to unveil a recapitalisation plan for the banks within weeks, plus rising hopes over the discussions regarding the next set of bailout funds for Greece, kept the FTSE 100 bouncing. Climbing 95.6 points to 5,399, the benchmark index has added more than 9 per cent in the four trading days since it reached a 15-month low last week.

Arm Holdings grabbed the top spot after the Cambridge-based group was boosted by yet more success from Apple. The US giant, which uses Arm's technology in its products, said it had received more than a million pre-orders for the new iPhone in just one day, helping the chipmaker to shoot up 36.5p to 591p.

Bid mutterings saw Petrofac push up 55p to 1,298p, although the vague chatter did not mention the identity of the supposed suitor. Takeover talk was also circling around the miners, with Xstrata being suggested as both predator and prey. The Anglo-Swiss digger advanced 27.1p to 937.1p after Credit Suisse gave its approval to the oft-floated idea of a merger between the company and the commodities giant Glencore International, which was 2.65p higher at 424.65p.

Analysts from the broker said the recent divergence of the companies' share prices meant that Glencore "could use its premium-rated equity and pay a significant premium without a deal being dilutive", as they reiterated their "outperform" advice on both.

The City gossips, meanwhile, were suggesting that Xstrata could be in the market to make its own acquisition. Vague chatter speculated that both it and ArcelorMittal could be interested in making an offer for AIM-listed Coal of Africa, although the South Africa-focused group – a frequent subject of bid rumours – eased ahead just 1.25p to 47.5p despite the talk mentioning a potential price of 120p a pop.

Rumours that one of its peers could be setting a trap helped Rentokil Initial to clean up on the FTSE 250. The multi-tasking group, which does everything from pest control to hazardous waste disposal, was lifted 2.95p to 69.2p off the back of whispers it may be about to receive an approach.

The whispers suggested its Danish rival ISS may be considering a move worth 110p a share, while possible private equity interest was also mentioned. Analysts weren't keen, however, noting that Rentokil has been the subject of similar mutterings before, although they pointed out its share price has more than halved since last year.

It was yet another miserable session for Premier Foods, as the owner of Mr Kipling cakes dropped again in the wake of Friday's profit warning. After losing over 40 per cent then, the food producer dropped a further 12.2 per cent to 5.09p, with both Royal Bank of Scotland and JP Morgan Cazenove slashing their target prices.

The latter cut its to a mere 1p, with the broker's analysts reducing their earnings forecasts by 40 per cent. "In our view, Premier Foods needs to make disposals to pay down its debt," they said, adding that a sale of Hartley's jam or Branston pickle could fetch £58m or £38m respectively.

Like the wider market, the oil explorers were being given a helping hand by the price of the black stuff rising, while positive comments from HSBC also helped. The broker's analysts said the recent sell-off in the sector had left it "looking attractive", and upgraded its advice on both Enquest – up 8.05p to 101.6p – and Premier Oil – up 11.9p to 372.4p – to "overweight". The former, meanwhile, got a further helping hand by yet more bid chat.

Petroceltic spurted up 10.56 per cent to 5.97p after the explorer's chief executive said it was in discussions over a possible sale of a stake in its Algerian operations, while the AIM-listed group also revealed promising flow test results from its field in the country.

FTSE 100 risers

Old Mutual 113.3p (up 5.5p, 5.1 per cent) Insurer's latest climb means it has now managed to add nearly 16 per cent in just four days.

Weir Group 1,650p (up 73p, 4.63 per cent) Engineer rises as Credit Suisse reiterates its "outperform" recommendation.

Burberry 1,261p (up 21p, 1.69 per cent) Upmarket fashion brand finishes in the blue ahead of its first-half update tomorrow.

FTSE 100 fallers

Compass 528.5p (down 6.5p, 1.21 per cent) Catering company retreats despite Royal Bank of Scotland keeping its "buy" rating.

Imperial Tobacco 2,153p (down 24p, 1.1 per cent) Cigarette manufacturer hit by investors moving away from defensive stocks.

National Grid 646p (down 3.5p, 0.54 per cent) Utility cut down by profit-taking after gaining 4 per cent over last three sessions.

FTSE 250 risers

Howden Joinery 113.4p (up 8.2p, 7.79 per cent) Kitchen supplier's share price has advanced 11 per cent in four days.

Barratt Developments 90.8p (up 4.2p, 4.85 per cent) Housebuilder manages to extend its winning run to a fourth straight session.

London Stock Exchange 851.5p (up 24p, 2.9 per cent) Climbs even as Goldman Sachs cuts its target price to 930p from 980p.

FTSE 250 fallers

Supergroup 713.5p (down 13.5p, 1.86 per cent) High street fashion retailer has its price target slashed by Espirito Santo to 635p from 925p.

JD Sports 835.5p (down 12.5p, 1.47 per cent) Clothing chain pegged back after a large rise on Friday.

SDL 645.5p (down 3.5p, 0.55 per cent) Investors choose to bank profits as software group falls for first time in four days.

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