Market Report: Invensys shares up as bid rumours return
Friday 05 November 2010
A rise in Invensys' share price was the signal for takeover gossip to re-emerge around it yet again, which traders were quick to shoot down.
The engineering and industrial controls company firm has frequently been the subject of rumours over a potential bid, with talk of an approach from Siemens doing the rounds in the summer. At one point yesterday its price reached 316.8p, but the gossip eased in the afternoon and the company finished on 300.3p, up 13.4p .
Analysts were not surprised that the possibility of a bid was once again in focus, with one saying it is a subject that is always talked about. "It's quite a logical thought," he added, "because Invensys is a £2.5bn market cap company and all of its peers are much bigger." He did point out that the company's pension deficit would cause problems, but said that if this was sorted out, "these stories could become very likely".
Although acknowledging the rumours, traders gave the main reason for Invensys' rise yesterday as an impressive conference call that is said to have allayed many analysts' fears over its latest figures. The company's first-half results, released yesterday, showed a 2 per cent drop in operating profits, and its rail unit took an £18m hit from increased costs on three major projects.
Overall on the FTSE 100, investors reacted with enthusiasm to Wednesday's decision by the US Federal Reserve to embark on a second round of stimulus measures to the tune of $600bn, and it ended 113.82 points up on 5,862.79, the highest it has been for nearly 29 months. The miners were among the top performers, with Xstrata – up 90p to 1,366.5p – and Eurasian – up 61.5p to 949.5p – both gaining.
Man Group, which itself has recently been the subject of takeover rumours, was the top dog after releasing its first-half results. The hedge-fund company posted forecast-beating pre-tax profits, with the main performer being its AHL fund. Singer Capital Markets was bullish about its outlook, picking up on its strong improvement in investment performance, and kept it as a "buy". The company ended 37.1p stronger at 290.8p.
The decision by the Canadian government to block BHP Billington's $39bn takeover attempt of Potash Corp may have been a blow for the world's largest miner, but traders saw an opportunity. Piling in to the company on the belief that BHP could initiate a share buyback, its price recorded a new high of 2,430p, adding 150p. Research from USB predicted that the company may "re-rate part of its 13 per cent underperformance relative to [Rio Tinto] since the bid was announced" as a result of the news, and kept its advice as "buy".
Unilever saw its price shoot up yesterday 114p to 1,924p, as the consumer goods giant – which makes everything from Bovril to Vaseline - revealed latest results that include a 3.6 per cent growth in sales over the third-quarter, matching expectations. Brokers welcomed the news, and Investec said they "remain happy buyers".
Just 20 companies suffered falls yesterday on the top-tier index, with Rolls-Royce the principal straggler. The engineering giant suffered after the news that a Rolls Trent 900 engine failed in a Qantas plane yesterday. The Sydney-bound aircraft had to make an emergency landing in Singapore, and the Australian airline grounded all of its six Airbus A380s in response. Singapore Airlines did the same with their fleet of the same model, knocking back Rolls-Royce 33p to 621.5p.
On the FTSE 250, the housebuilders found themselves crowding around the top despite mixed results from the latest Halifax report. Although house prices fell by 1.2 per cent over the past three months, October saw a 1.8 per cent rise that followed a large drop of over 3.5 per cent the month before. Taylor Wimpey and Barratt Developments were just some of the sector's beneficiaries, up 1.93p to 25.02p and 5.85p to 83.5p respectively.
The miner Kenmare Resources headed the mid-tier index, climbing 2p to 23p. Tate & Lyle also advanced, ending 34.3p better off on 524.5p, after it beat profit forecasts for the half-year, banking a rise of more than 20 per cent. Supporting its "buy" advice on the firm, Prime Markets' Richard Curr predicted good times ahead, saying "there is every chance the group could upgrade forecasts for the current full year and next year".
However, things were not looking so good for Cable & Wireless Communications, and its announcement of a 2 per cent climb in sales over the first half could not prevent the telecoms company sliding 7.06p to 46.99p.
Among the small-caps, Photo-Me International – best known for its photo booths – soared 13.56p to 67p off the back of a bullish trading statement and a promise from the company that it will look at a considerable increase in its interim dividend.
On the Aim, the oil explorer Cove Energy managed to raise about £110m through a placing of 144.7 million shares. The company plans to use some of the money on its East Africa prospects, and it edged 1.25p up to 80.5p.
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