Market Report: Genie back in bottle at Coca-Cola HBC
Wednesday 30 October 2013
City experts yesterday took the fizz out of a Greek bottling company on fears of a slowdown in the drinks market. The blue-chip bottler Coca-Cola HBC – once known as Coca-Cola Hellenic Bottling Company – ran out of juice when analysts at the investment bank Nomura issued a warning about its growth prospects and hefty share price. The group, which bottles fizzy and still drinks for Coca-Cola and other brands, as well as bottling and distributing beer in parts of Europe, is a recent entrant to the blue-chip index. Its shares peaked in mid-September at 1,979p when a range of investors piled in, but Nomura thinks the "positive technical impact of inclusion in FTSE indices [is] likely to have run its course" for now.
Nomura also highlighted concerns over the "slower growth outlook for global beer" and a "slower volume growth trajectory" compared with its peak years of 2004-08.
Nomura's experts said Coca-Cola HBC looks expensive on a price/earnings ratio of 23.9 times earnings but does at least offer the long-term advantages of "strong market shares in key territories". In the short term Nomura rated it "reduce", down from neutral, and gave it a 1,500p price target for shares that fell 25p to 1,798p.
It looked better for the mid-cap drinks maker and Irn-Bru owner AG Barr. Analysts at the investment bank Canaccord Genuity expect it to have performed well as the favourable weather during the summer and autumn will have helped sales. The group has been improving costs and efficiencies and Canaccord noted that it "should also start to see cost savings from reduced distribution miles, lower inventory levels and enhanced organic growth" with the start of production at its Milton Keynes distribution unit. AG Barr rose 26p to 528p.
The wider market was buoyed by upbeat traders who assumed the US Federal Reserve will not begin reducing monetary stimulus for some time. The FTSE 100 climbed 48.91 points to 6774.73 points.
Traders noted that data from the International Monetary Fund – showing Russia reduced gold reserves in September for the first time in a year – could hurt the gold price. Precious metal miners were subsequently weaker, with Randgold Resources down 89p to 4,762p and Mexico's Fresnillo tarnished 23p at 1,019p. The financial sector was also fragile and Lloyds Banking Group, after reporting a strong profit rise accompanied by a £750m PPI mis-selling charge, lost 1.61p to 78.01p.
Also loitering at the bottom of the benchmark index was explorer Tullow Oil after it plugged and abandoned another well. Punters were unhappy with the development, at the Wisting well off the coast of Norway, especially as it followed the update from Tullow on Monday that operations in Kenya's Turkana region had closed because of striking workers. Tullow is confident it can sort things out there, but after a 2.2 per cent tumble on Monday, the shares dipped another 2.19 per cent to 936p.
Oil giant BP had better news for investors in the shape of a 5.6 per cent dividend rise and it was top of the table, up 25.4p to 477.5p.
Marks & Spencer was 10.6p smarter at 485.6p on reports that its clothing sales have improved.
Housebuilders were popular after mortgage approvals data for September showed continued increases, and Persimmon built up a 31p gain to 1,255p.
Back on the mid-tier table, there have been on-and-off rumours about potential takeover activity at the hedge fund Man Group. Yesterday vague rumours returned that an American bank is taking a look again and Man added 2p to 91p.
Online grocer Ocado was also in favour and gained 24.6p to 430.5p.
The serviced-office group Regus suffered in the morning session as investors balked at its expensive expansion plans when it gave an update on its full-year results. But after taking in all the good news, traders pushed the shares up 1p to 205.8p.
The engineering and technology specialist China New Energy is in talks with Sunbird Bioenergy to develop a bio-refinery in Nigeria. The market cap of the group doubled as the shares jumped 3.05p to 3.675p.
China's Green Dragon Gas has agreed a deal with a subsidiary of China National Offshore Oil Corporation and it hissed up 22p to 270p.
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