Market Report: Investors in no mood for takeaway pizzas

 

News that a long-term shareholder has sold his remaining slice in Domino’s Pizza caused the market to lose their appetite for the company yesterday.

Nigel Wray, the property entrepreneur and chairman of rugby club Saracens, was one of the earliest big investors in Domino’s and once held close to 30 per cent. But after the market closed on Friday it was revealed he had flogged his remaining 2.99 per cent stake and banked £28m.

Yesterday was the first time investors could react to the news and Domino’s dipped 21.5p to 568.5p – the slump making it the second-worst performer on the mid-tier index.

Mr Wray was joined in his sell-off by the chairman Stephen Hemsley, who sold 600,000 shares, retaining a 0.37 per cent stake, down from 0.67 per cent.

They followed chief financial officer Lee Ginsberg, who recently sold 70,000 shares, leaving him with a 0.03 per cent stake. Canaccord Genuity’s Wayne Brown advised punters to “follow the leaders” and rated the pizza maker a sell with a 500p price target.

Mr Brown argued: “Domino’s Pizza has had a long history of directors selling shares. However, have we reached a point where investors should take note?”

Mr Brown is concerned about the company’s struggling German business and said it “raises risks in our view that the path to profitability, with breakeven in 2016-17, may not be achievable”.

He concluded that he saw “little by the way of a positive catalyst” for the group at the moment.

Traders lost their hunger for the wider market too, as banking results pushed the market back. Even reports that the UK’s services sector grew at its fastest pace in more than six years only helped the blue chips stay in positive territory during the morning session. By the close it was in the red and lost 28.29 points to 6,619.58.

HSBC reported first-half profits of $14.1bn (£9.2bn) but it missed City forecasts and the shares hit the bottom of the blue-chip index, down 33p to 721.7p.

But one bank that was still in favour was Lloyds Banking Group on the promise of a big payout from the part taxpayer-owned lender. Lloyds was one of the best performers on the benchmark index and soared 1.96p to 75.69 – after it emerged it told potential investors that it expects to pay out up to 70 per cent of profits in dividends by 2015 – a lot more than any other UK bank.

It has not paid a dividend since 2008 – when it was bailed out by the Government during the financial crisis. Antonio Horta-Osorio, the chief executive, said last week at Lloyds’ half-year results he expected it would be a “high dividend” business.

After his comments, the shares surged past the 73.6p average price the Treasury paid for its stake. But it was also reported that the Government share sale might not come until later this year.

Back on the mid-cap index, Zillah Byng-Maddick, the former finance boss and interim chief executive at Trader Media Group, the parent company of the motoring website Auto Trader, is to join the online betting specialist Betfair as a non-executive director. Ms Byng-Maddick, who will take up her position at Betfair next month, is also a non-executive director at the publisher Mecom. Her appointment came a minute before the market closed and Betfair ended the day down 0.5p at 929.5p.

Citi decided  it was timeto upgrade Thomas Cook. The broker said it was “confident in cost savings” at the tour operator. It raised its target price to 195p. Thomas Cook  was top of the mid-cap index, up 8.9p to 169.9p.

The AIM-listed Nationwide Accident Repair Services crashed 10.5p to 56.5p after issuing a profit warning.

The low-cost African airline Fastjet revealed a 10-for-1 share consolidation to raise funds and it fell 0.1p to 1.15p.

Gemfields , the emerald miner, issued strong full-year production and sales figures. Annual emerald production at its Kagem mine in Zambia was up 42 per cent and the shares sparkled, up 1p to 24p.

The action house owner Noble Investments said it could see no reason why its shares have been weak recently and explained that trading at the auction house, which sells everything from coins and stamps to art and jewellery, is “continuing satisfactorily”. It also said the settlement reached with a Qatari collector for money owed, including costs, after a Greek coin auction “will be paid before … the year-end results”. The shares fetched 208.5p, up 9.5p.

Beales, the regional department store group, said it “had become aware” that UBS now holds 4.97 per cent of the group, but the shares were static at 11.5p.

Buy

Ferrexpo

Snap up shares in miner Ferrexpo, Investec suggests. The broker thinks the Ukrainian iron ore producer’s half-year results tomorrow will be good and it is worth buying the stock because of its “well-developed resources in Ukraine”. Investec’s scribblers think the stock offers the “lowest-risk pure iron ore exposure in the London market.” It gives the shares, which are 174.7p, a 192p price target.

Sell

Morgan Sindall

Flog shares in Morgan Sindall, Prime Markets advises.  It thinks the shares traded ahead of events this year and the fact the construction group said overall market conditions are not expected to significantly improve in the second half of the year is a reason to sell. It gave the shares, which are 670p, a 644p price target.

Hold

Xchanging

Hang on to shares in Xchanging, Liberum Capital recommends. The broker expects “little earnings progress in 2014” due to a loss of some contracts at the IT systems outsourcer but predicts “growth to accelerate thereafter” so it rates them a hold, with a 145p price target for shares that are currently 135.5p.

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