Market Report: IPF left in the cold despite buyback
Wednesday 14 August 2013
City analysts slammed the door in the face of International Personal Finance yesterday. The mid-cap listed doorstep lender reported strong half-year results last month and started a £60m share buyback to reduce its capital ratio to around 50 per cent – but that wasn't good enough for analysts at Citigroup.
Citi's Simon Nellis said all the "good news is in the price" and reduced his rating to neutral, down from buy. Mr Nellis did increase his target for the shares to 700p but he added: "Despite forecasting higher leverage in the business and… more capital return, we see limited upside."
Investors were inclined to agree and the lender, which focuses on emerging markets including Poland, Czech Republic and Slovakia, was one of the worst performers on the FTSE 250, declining 25.5p – or 4.08 per cent – to 599.5p.
International's finance director was also a seller. After the buyback programme David Broadbent sold 29,936 shares on Monday at a price of 623p and now holds 62,611 shares.
The wider market was having a reasonably good, but quiet, day. The UK consumer price index data was in line with market expectations, and healthy German ZEW economic sentiment figures helped the FTSE 100 up 37.6 points to 6,611.94.
Liberum Capital decided to fantasise about M&A in the food sector. Liberum decided Pinnacle Foods' purchase of Unilever's Wish-Bone and Western salad dressings brands on Monday means more deals will follow. The broker said Blackstone-owned Pinnacle Foods, which owns brands including Aunt Jemima and Birds Eye in the US, as well as other companies, could "begin to look at bigger parts of Unilever". Liberum predicted Unilever could sell the bulk of its food business and use the proceeds for buybacks. Unilever gobbled up 30p to 2,618p.
Analysts in the Square Mile could not make up their mind on the prospects for the state-owned Royal Bank of Scotland.
Two City brokers came up against each other with the one in the Goldman Sachs corner crying "buy" and the other, representing Nomura, urging "sell". Goldman insisted RBS could create a "better bad bank" by separating assets rather than splitting them off.
The investment bank claimed that "retaining the bad bank assets on the RBS balance sheet" would be preferable to transferring them into an "off-balance sheet bad bank". Investors will ascribe a "fuller value to the core RBS", which would make it look as good as Lloyds.
Nomura begged to differ. Its analysts said the bulls' point that RBS is the next Lloyds is wrong because the "main difference is the profitability of the core". They warned that it remained "challenged" and will "take time to restore". But Goldman was so convinced that it repeated its buy recommendation and raised its target price to 400p.
Investors inclined to Goldman's view and RBS edged up 3.5p to 333p. It has been on the rise since the start of this month.
The bottom of the benchmark index was occupied by investment group Old Mutual as analysts at Nomura cut it to neutral. It lost 5.2p to 196.1p.
John Wood Group, the engineers, got a boost from an Investec analyst note that raised the target price to 900p from 800p ahead of Wood's interims next Tuesday. Investec predicted it will report "strong profits growth" for the first half. Wood was 20.5p stronger at 915.5p.
Back on the mid-tier index, paint chemicals firm Synthomer admitted weak demand from Europe had hit profits over the first-half of the year. The company formerly known as Yule Catto announced pre-tax profits for the period had fallen to £48.6m from £54.2 a year earlier, a drop of over 10 per cent. At the same time, underlying sales decreased 7.5 per cent to £558.3m; but the shares rose by 9.5p to 215.5p.
Neil Woodford's Invesco Perpetual emerged as a significant shareholder of the Aim-listed stem-cell research group Reneuron. The company announced a placing that raised £25.35m last month. And yesterday, after it emerged that Invesco now holds 22.36 per cent, it was 0.155p better off, at 4p.
Synety Group, the software company, placed 1.4 million new shares but slipped 52.5p 177.5p.
JP Morgan Chase increased its stake in the oil group Providence Resources to 9.04 per cent but it slumped 21.25p to 355.25p.
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