Market Report: Kenyan gossip lifts Tullow and Afren
Wednesday 23 January 2013
Hot gossip flown in from northern Kenya warmed up chilly London and sent shares in oil explorers Tullow Oil and Afren to the top of the charts today.
Punters piled in to Tullow Oil and it spurted up 40p to 1,195p to take top spot on the benchmark index while Afren jetted up 12.8p to 152p and was top of the tree on the mid-tier index after the City speculated that the pair's quest for oil in Kenya is about to pay off.
Chat suggested their Paipai prospect in the risky northern area of Kenya has achieved some pretty good drilling results. The official results for the well, which the pair are drilling in joint venture with Canada's Africa Oil, are expected next month.
When drilling at the well started in October the frontier area of northern Kenya was viewed as very high risk due to conflict in the area. But recent discoveries in Kenya has drawn attention to its potential.
Afren has had a good week. On Monday it reported record production for 2012 and said that full-year revenues were up by 151 per cent.
News that Uganda may auction 13 new blocks for oil and gas exploration also helped Tullow Oil higher today.
Oil explorers have been in focus recently with traders expecting some kind of consolidation. Oil and gas specialist BG Group, up 4p to 1,149p, was the latest to be subject to re-heated but extremely vague bid rumours.
The City was cheered by knockout results for US tech giants Google and IBM. The strong stateside results which greeted traders this morning, and with no economic news to dent sentiment, ensured the top-flight index stayed in positive territory and reached a four-and-a-half -year high, adding 18.47 points to 6,197.64.
But the applause for tech specialists didn't stretch to the UK's trooper – Sage Group. Poor old software specialist Sage is finding Europe a struggle and the shares shuffled down 3.8p to 313p – one of the worst performers on the benchmark index today.
Newcastle-based Sage said there were no problems at its business across the UK, Ireland, North America, Brazil and South Africa, but admitted that mainland Europe remains "challenging".
Analyst George O'Connor at Panmure Gordon repeated his sell rating of the stock and asks are "the shares wasting my time?"
The stock was the subject of takeover talk last year but rumours have died away and Mr O'Connor slaps a price target of 297p on the shares alongside his sell rating and thinks Sage "needs to grind through the conditions".
He prefers Micro Focus, up 6.5p to 611.5p, which he thinks will have been boosted by news that IBM reported 56 per cent growth in the computer system Mainframe – which he says is "a good early lead indicator of health in Micro Focus' core market".
Vague bid chatter continued to circle retailer Marks & Spencer, up 9.4 to 379.1p, M&S boss Marc Bolland has been trying to turn the fortunes of the high street bellwether around and hired former Jaeger boss Belinda Earl to reinvigorate womenswear last year.
The retailer may be somewhat vulnerable to a takeover bid but it has long been the subject of fantasy M&A and most traders did not think that any approach was imminent.
Bottom of the benchmark pile was holiday company Tui Travel. The shares travelled down 14.1p to 278p – a near 5 per cent decline – after its German parent backtracked on plans to buy up the UK group. The share price dip outweighed last Wednesday's 3.9 per cent jump when the potential deal was first announced.
Housebuilders slumped to the bottom of the mid-tier index after analysts at JP Morgan downgraded a clutch of builders including Redrow, at the bottom of the index and 8.3p lighter at 184p.
Over on the small-cap index, Tom Haughey, the boss of steel group Severfield-Rowen, quit after cost overruns at its Cheesegrater skyscraper project hurt results. The company's shares crashed 41.85p to 78p.
Kleeneze owner – the home-shopping and education supplies retailer Findel – reported a 10.2 per cent increase in third-quarter sales but the shares edged down 0.7p to 8.45p.
AIM-quoted miner Herencia Resources ticked up 0.16p to 0.8p when it announced a positive update from a feasibility study at its Paguanta project in Chile.
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