Market Report: ENRC founders get bid breathing space
Saturday 18 May 2013
The founders of troubled Kazakh miner ENRC have been given more time to come up with a better bid, but the City isn’t convinced a better offer will be made.
Alexander Machkevitch, Patokh Chodiev and Alijan Ibragimov, who together with the Kazakh government hold 54 per cent of ENRC, are said to still be arranging financing and their early offer – rumoured to be around 270p a share – was rejected yesterday as it “materially undervalues” the group.
Rumours that the consortium is still trying to secure capital came as the shares were knocked back 23.7p to 271.6p after doubts emerged about the value of a future offer.
The consortium now has until 3 June to make an bid to buy out the remaining shares that they do not own. Kazakhmys, the rival miner that is controlled by the Kazakh government, owns a 26 per cent stake.
ENRC is facing an investigation from the Serious Fraud Office, and has been plagued with corporate governance issues. The share price has slumped 50 per cent in just a year and the founders have been hoping to take the group private and rebuild it as a private company.
There were questions from the start about its suitability to be a listed London entity due to these concerns about corporate governance.
The benchmark index finally breached the coveted 6,700 barrier after a short-lived dip on Thursday. The FTSE 100 advanced 35.26 points to 6723.06 – the first time since the summer of 2007.
Mike van Dulken, head of research at Accendo Markets, said: “Bullish appetite is still strong to keep the uptrend intact. The index closed up another 100 points for the week, 200 points in two weeks and 500 points since last month.”
The next barrier to beat is the June 2007 high of 6732.4 – once the blue-chip table tops that, it will be at a 13-year high.
Stocks holding it back included the product-testing company Intertek, which worried the market with a forecast of a decline in its minerals business and fell 67p to 3,385p.
The sale of the Government’s stake in the “black horse” bank was given a giddy-up when punters piled in on news of a return to profit this year. Enthusiasm for Lloyds Banking Group pushed its price up to the break-even level for a government exit – increasing the likelihood of a sale sooner rather than later.
The shares trotted up 1.93p to 62.84p.But analysts predicted they will need to stay above the 62p level for a longer period before the Government decides to act.
Supermarkets group Morrisons has finally agreed a distribution tie-up with online grocer Ocado, but to a mixed reception in the City. Shore Capital claims Morrisons has entered into “a somewhat worryingly expensive and extensive deal for its business and its shareholders”.
Shore rates the shares a sell with a 287p price target. But there were enough fans for them to add 3.9p to 286.5p. Ocado checked out a 72.2p gain to 274.1p.
Train and bus operator National Express got the backing of the Department for Transport to extend its franchise to run the Essex Thameside line until September 2014.
The Transport Secretary, Patrick McLoughlin, said the extension is the first contract agreed since the West Coast debacle when mistakes were revealed in the franchising process last year. However, the deal is an extension before a long-term deal is struck. The shares journeyed up 2.9p to 213.7p.
Ferrari and Bentley car retailer HR Owen said particularly strong used-car sales got the group off to a good start to the year. At the annual general , the chairman Jon Walden said that profits were currently running ahead of management expectations and the shares raced ahead 12p to 120.5p.
Healthcare property owner Assura Group received a takeover approach from rival MedicX Fund yesterday – valuing the investment fund at about £216m. MedicX has until 14 June to make a firm offer or walk away. Assura shares were 2.25p healthier at 38.25p.
Prefab hotel rooms supplier Snoozebox said it needs more cash to support trading this year and has pulled out of two events. Earlier this year, the AIM-listed group, which supplies festivals such as the Hay Book Festival and the Goodwood Festival of Speed, issued a profits warning and the shares slipped 9p to 26.5p.
Snap up shares in Petroceltic International, Liberum Capital advises. The explorer has agreed a deal for a partner to work on its Isarene permit in Algeria, which contains the significant Ain Tsila gasfield. Liberum thinks this is good news for shareholders. Petroceltic has decided to delay its planned listing on the main market until the deal completes. Liberum retains its buy rating with 11.4p price target for shares that are 6.85p.
Royal Bank of Scotland
Flog shares in Royal Bank of Scotland, Investec says. Investec’s perennial bear Ian Gordon admits he was “encouraged by further balance-sheet progress” but the “grim earnings outlook” constrains his enthusiasm for the taxpayer-owned bank and he rates the shares, which are 336.8p, a sell with a 300p target.
Hang on to the publisher and events business Informa, Jefferies suggests. Jefferies’ David Reynolds said he thinks its possible exit from the corporate training business is a “distinct positive” but without knowing when this will happen and for what price, it is difficult to get too excited. He would like to see more “certainty regarding execution” before he changes his rating. He gives the shares, now at 526.5p, a 510p price target.
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