Market Report: G4S back on track after Olympic dip
Tuesday 22 October 2013
Punters were hoping rumours of a sell-off of G4S’s cash transport business would mean a payday for investors in the security group. G4S jumped more than 3.4 per cent yesterday, after weekend reports that private equity group Charterhouse Capital Partners is eyeing its cash-security arm in a potential £1bn deal.
The cash business is said to generate about a quarter of the company’s profits and is the part that transports cash from shops and tops up ATM machines.
Cevian Capital, a Scandinavian fund with former City minister Lord Myners as chairman, is a shareholder in G4S and had been pressing the company to look at flogging parts of its group; traders think other private equity outfits might also be eyeing parts of G4S.
The company has been under pressure since a series of fiascos last year including its Olympic contract. Its chief executive Ashley Almanza, who joined in the summer to replace former boss Nick Buckles, will unveil plans at an investor meeting next month, which may include plans for its cash-security arm. G4S secured a 8.5p gain to 250.5p and was close to the top of the blue chip index.
Another riser was the engineer Amec, up 44p to 1,148p, after a thumbs up from analysts at Deutsche Bank, while defence and aerospace groups BAE Systems, up 9p to 453.9p, and Rolls-Royce, up 31p to 1,123p, also benefited from kind words from analysts at Citi.
The wider market was generally optimistic with no big economic news to concern traders. But the – delayed – US unemployment numbers did make some cautious and the FTSE 100 rose 31.62 points to 6,654.2. The FTSE 250 broke through the 15,500 barrier for the first time and closed up 130.8 points at 15,521.98.
Bottom of the benchmark table was Royal Bank of Scotland, as traders feared comments from George Osborne at the weekend could mean the bank will split up soon.
Analysts have been queuing up to warn punters to sell their shares in the 81 per cent taxpayer-owned bank ahead of its third-quarter results next month. Nomura said it is bad news if a “bad bank” is hived-off and its experts said “Minority shareholders have much to lose from an unfavourable outcome of the good bank/bad bank review.”
The Chancellor instigated a review in June of RBS on whether a “bad bank” containing problem loans of up to £120bn could be split off. Comments from Mr Osborne at the weekend about the options for a split, were followed by an RBS sell-off as investors panicked. Nomura rated it reduce, following in the footsteps of analysts at Investec who last week said investors should “sell ahead of the results”.
Nomura was also concerned about potential settlements arising from the US Federal Housing Finance Agency court case. It fears there will be little good news in the short term.
Banks were out of favour across the board on news that capital requirements could be increased – meaning some such as Barclays will have to keep even more cash on their balance sheets. RBS, run by Ross McEwan, tumbled 19.6p to 353.1p and Barclays declined 3.1p to 274.75p.
The retail giant Marks & Spencer stumbled back 8p to 487.1p following news that buying executive, Gillian Ridley White, is leaving the retailer.
Goldman Sachs’ dedicated followers of fashion issued a luxury report and gave the thumbs-up to Burberry, up 23p to 1,550p, and advised buying Somerset-based leather brand Mulberry on “mispriced growth” and it added 2p to 1,001p.
The AIM-listed plane charter group Hangar8 plans to add a new Bombardier Challenger aircraft to its aero-medical business in Africa and it hovered up 0.5p to 164.5p. Online health service Fitbug said it had launched a wireless sleep tracker and it advanced 0.05p to 1.35p.
Fellow AIM stock Shanta Gold shone a penny brighter at 1p at 14.75p after the Tanzania-focused miner said it is on track to deliver full year gold production of circa 63,000 ounces.
Meanwhile Fox Marble, the quarrying business centred on Kosovo and the Balkans region, saw its update followed by a solid rise of 1.75p to 16p.
Snap up Supergroup, Canaccord Genuity insists. The broker thinks the share price fall recently has been “overdone” and the fashion group now offers a “strong buying opportunity” ahead of its second-quarter trading update next month. Canaccord said its international expansion and online growth will mean it is likely to achieve “premium growth over the next few years”. It has a 1,500p price target on the shares, which closed at 1,109p.
Flog Informa, Liberum Capital advises. It is concerned that the publisher and events business’ new product development will not help revenue growth but will only support its subscriber renewal shortfall in the short term. Liberum does not expect things to improve in the next year and so “recommends some profit-taking” and rates the shares, 554p yesterday, a sell.
Hold: ANGLO AMERICAN
Hang on to Anglo American, UBS suggests. It admits the third-quarter production update last week showed Anglo’s Kumba iron ore mine is “struggling” but actually copper is “better than expected” while coal and diamond production were all above UBS’s expectations. The broker rates the miner neutral, with a 1,500p price target for shares that are 1,536.5p.
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