Market Report: ENRC back in favour after terrible year
Monday 14 January 2013
Admirers of miners with corporate governance issues have been thin on the ground, but today analysts and investors started to appreciate Eurasian Natural Resources Corporation's attributes. ENRC was certainly out of favour last year. Its shares declined more than 50 per cent during 2012, and even last month Goldman Sachs scribblers cut their buy rating to hold.
But today Credit Suisse's mining specialists outed themselves as fans of the Kazakhstan and African-focused digger. They claim its "downside risks" are limited. Why? They think it will move on from development to the actual production of its assets, and may even start to sell some of its smaller projects.
They now rate the shares outperform, up from neutral. The share price followed suit, and was the biggest riser on the benchmark index, up 11.4p to 334p. Credit Suisse gives the shares a price target of 400p, up from 350p, and added that the "growth delivery" could even see the shares rise to around 500p.
A blue-chip mover is always accompanied by gossip, and today some traders speculated that ENRC's shareholders could be thinking of splitting or buying out the company. Last year there were rumours that the miner could split its African holdings from its Kazakh assets. This time around vague chat suggested that the founding shareholders could be assessing their holdings, while the fellow FTSE 100-listed miner and 26 per cent owner Kazakhmys is also said to be weighing up its options. But most traders dismissed the vague bid babble as way off the mark, for now.
Kazakhmys, in which the government of Kazakhstan has a 26 per cent stake, was itself out of favour. Analysts at Barclays rated it underweight and the shares fell to the bottom of the blue-chip index, down 23p to 785.5p.
Traders with an eye for fashion speculated that the British luxury brand Burberry could produce a better than expected third-quarter update today. The shares, which suffered at the hands of profit warnings last autumn, strutted up 20p to 1,325p.
Banks were still in favour with investors, even after last week's steady gains prompted by the relaxation of the Basel III liquidity rules. Lloyds Banking Group was already 2012's best performer, and it jumped more than 8 per cent last week. An earnings forecast upgrade from analysts at Redburn accompanied another 0.88p rise to 54.92p today.
The top-flight index continued last week's rise during morning trade, but worse than expected news from company updates in the US toppled investor sentiment by the afternoon. In the US Apple shares were one of the big fallers when it emerged that there was reduced demand for its iPhone 5. With sentiment weakened the FTSE 100 ended off 13.72 points to 6,107.86.
The software group Sage was one of the losers on the blue-chip index after analysts at Barclays cut their rating to sell, from hold. The shares lost 3.6p to 310p.
The telecom group Cable & Wireless edged down 1.68p to 40p on the mid-cap index after it confirmed it had sold 51 per cent of its Macau operation to Chinese state-owned Citic Telecom.
Competition regulators postponed their decision on the proposed merger of the fizzy drink firms AG Barr and Britvic. The groups said they expected the Office of Fair Trading to make a decision next month. AG Barr trickled down 5.3p to 490p and Britvic gurgled down 1.1p to 413.1p.
News of a strong Christmas helped shares in Moss Bros to a five-year high. The men's suit and formalwear retailer said it expected annual profits to "exceed" market expectations, and analysts upgraded their profit forecasts to £2m for the current year. The shares lifted 4.5p to 71p.
The serial entrepreneur and resources specialist Algy Cluff's fifth company, Cluff Natural Resources, soared 0.75p to 4.38p on AIM after winning two licences for Underground Coal Gasification in the Loughor estuary in Wales and the Dee estuary in Merseyside. He thinks the UK could avoid the controversial use of fracking – hydraulic fracturing to produce energy for the UK. The licences have been awarded by the UK Department of Energy & Climate Change, and Mr Cluff will now apply to develop the sites, which he said have the "potential to do much to address the UK's future energy needs".
Also on AIM, Afferro Mining said an exclusivity period with International Mining and Infrastructure Corporation has ended. It said talks will continue, but it will also entertain discussions with other potential bidders. Its shares lost 6.25p to 93.5p.
Buy: JD Sports
Snap up shares in JD Sports, Seymour Pierce urges. The broker says that the sportswear retailer's shares "are currently the lowest rated in our universe" and that "the potential for restructuring has been overlooked". It even thinks an "opportunistic bid from majority owner, Pentland" could be on the cards and any drag caused by its Blacks business "is fully discounted". It gives a target price of 1,000p for shares presently at 720p.
Sell: TUI TRAVEL
Panmure Gordon has Tui Travel in its sights and advises dumping its shares. It says that the travel agent's "current trading is strong" but adds that it is still able to detect "headwinds in continental Europe. The company's shares at present are 282.3p but Panmure gives a target of 245p.
Hang on to shares in Rentokil, says Investec. The broker feels that, "after a prolific share run" last year the pest controller is now "poised for investor scrutiny". It says the company's parcel business, City Link, "continues to disappoint", but the core business "has recovered its organic poise". Shares are 91.3p; Investec gives a target of 94p.
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