Market Report: Investors drown their sorrows at Marston's

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The Independent Online

Marston's was among the few stocks that managed to book gains as the wider London stock market veered south last night.

The pubs group rose by 1.3 per cent or 1.4p to 106.4p, compared with a bruising 1.6 per cent decline for the mid-cap index as a whole, after Credit Suisse analysts switched their stance on the stock to "outperform" from "neutral", with a revised 131p target price, compared with 116p previously.

Against the backdrop of "resilient" like-for-like sales in the managed pub sector, the broker said the Marston's new-build programme had continued to "outperform expectations". Adding to that, Credit Suisse said that, in the group's tenanted estate, it saw "further profit upside to Marston's new franchise-style retail agreements".

"Our best-case scenario for Marston's implies 17 per cent upside to our [estimated earnings for 2015], assuming the current outperformance of its new-builds and retail agreements continues," the broker said, helping the stock to buck the market trend.



Overall, italy, and the eurozone in general, dominated sentiment. The southern European country was the centre of focus amid worries about its debt position. Fears that the crisis that has engulfed Ireland and Greece could extend to Italy hit stock markets across the Continent, with the UK proving no exception.

The result was that the FTSE 100 remained below the 6,000-point mark, shedding 61.42 points to 5,929.16. The FTSE 250 was also unsettled, sliding by 194.2 points to 11,880.1 as traders kept one eye on equities and another on peripheral bond yields.

International Power, one of only seven blue chips in the black, was among the winners on the benchmark index, vaulting by 2.6 per cent or 7.8p to 309.1p amid relief at the limited impact of the recently announced Australian carbon tax plan.

Last week, traders had sold down the stock on concerns about the potential hit from the levy on the group's Australian arm. But yesterday, with the details in hand, the analysts at Espirito Santo argued that the tax would have a "negligible impact" on International Power's earnings over the next five years.

The view was reinforced by an update from the company, which said that while the plan – which still needs to be approved by legislators – would be "important to our Australian business and its employees", it was not "expected to be material in the context of the group".

Around the miners, Rio Tinto, down 51.5p at 4,450p, Xstrata, down 11p at 1,366p, and others with exposure to the island nation were held back along with the wider sector, including the Chilean copper group Antofagasta, down 16p at 1,408p, as commodity prices came under pressure from Europe's sovereign debt woes. Gold did well, however, as investors sought a safe haven, touching a record high in both sterling and euro terms.

On the tax, the impact was limited by Peabody Energy and ArcelorMittal's $5bn bid for the Australian coal miner Macarthur Coal. The approach, which was pegged at a 40 per cent premium to Macarthur's closing price on Monday, offered reassurance that the levy would not seriously damage the country's vast mining industry.

Elsewhere, banking and insurance stocks were hit by the concerns surrounding the eurozone. Royal Bank of Scotland was the weakest of the lenders, easing by 1.49p to 35.72p, with Barclays, down 9.3p at 233.95p, close behind. Standard Chartered was the most resilient of the banks last night, closing flat at 1,627.5p.

Farther afield, the telecoms and networking firm Spirent Communications saw its shares slip by another 3.2p to 140.1p yesterday on the read-across from US peers Ixia and Aeroflex, both of whom issued negative updates last week.

The decline came despite words of support from the City, with Panmure Gordon reiterating its "buy" view, saying: "A surprise profit warning from Ixia is putting Spirent's shares price under pressure. To be sure, as news spreads we expect sell-side analysts to trim estimates and target prices, so investors should anticipate further short-term weakness – but this will make for a great buying opportunity."



Premier foods fell by more than 4 per cent or 0.8p to 17.86p after UBS abandoned its "buy" view, citing the food producer's recent profit warning. The broker switched its stance to "neutral", arguing that the update weighed against the "deleveraging story".

"Premier's necessarily single-minded focus on deleveraging and its double-digit free cash-flow yield imply relatively attractive medium-equity returns," UBS said, trimming its target price for the stock to 21p from 32p. "However, in our view, this... needs to be underpinned by a demonstration that Premier can generate top-line growth and margin stability. With the latter gone and the top line still declining, we judge it appropriate to downgrade our rating."

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