Market Report: Morrisons is still too pricey for some
Friday 30 August 2013
Foodies in the City yesterday called for punters to leave Wm Morrison on the shelf as it still hasn't reached a bargain-basement price yet. Cheap supermarkets such as Lidl and expensive ones such as Marks & Spencer have maintained market share and reported strong sales, according to the latest report by market researcher Nielsen this week. But grocery experts at Shore Capital said Bradford-based Morrisons is still struggling to turn a corner.
Its sales are back in negative territory, down 1 per cent in August. Shore's scribblers had been "searching for a bottom" but they still haven't found it. They said the group still has further to fall, and rated it a sell with a 293p price target.
Shore admitted a "return to sales growth in recent months" had given it grounds for "moderate encouragement" for the group run by Dalton Philips but the latest sales figures did not comfort Shore or investors, and it edged back 1.5p to 291.4p. Shore forecasts first-half pre-tax profit of £370m. Meanwhile, Shore preferred M&S and rated it a buy with a 475p price target. The shares ticked up 2p to 477p.
Morrisons' decline yesterday was in the context of a rising wider stock market – equities were back in favour as fears about military action in Syria were put on hold. The Syrian concerns had caused stock markets to tumble earlier this week but signs that Western powers will wait for a conclusion to UN investigations on the use of chemical weapons before making any decision sent the markets into a relief rally.
The FTSE 100 index added 52.99 points to 6483.05. Even news that the US economy is growing more quickly than expected in the second quarter did not spook investors. The better-than-expected US figures, which were boosted by strong exports, could have raised concerns that the economic stimulus programme will be wound down but this didn't take the shine off gains in London.
Traders were upbeat following news that a big deal could be on the cards. Telecoms giant Vodafone returned to discussions with partner Verizon on the potential sale of its 45 per cent stake in its US joint venture Verizon Wireless. Vodafone was top riser, calling up a 15.45p gain to 204.75p.
Outsourcing specialist Serco was bottom of the blue-chips, down 68p to 538.5p, after it said it is investigating financial irregularities in its prisoner escorting contracts.
Security group G4S, which is also facing an investigation over prisoner-tagging contracts, declined 0.9p to 251.5p as Goldman Sachs analysts rated it a sell with a 194p price target.
Analysts at Deutsche Bank downgraded Financial Times owner Pearson to sell, and said the publisher faced more structural change than its peers. It was 36p worse off at 1,280p.
Mid-cap oil and gas explorer Soco International is returning cash to shareholders, and reported record production for a third successive half year. It jetted up 12.7p to 398.7p.
Gambling software developer Playtech said it could make €600m (£517m) of acquisitions as it reported a 13 per cent hike in first-half sales.
Russia's Petropavlovsk was the latest gold miner to report a writedown after the price of gold slumped this year. The small-cap miner, co-founded and chaired by Peter Hambro, reported a $742m (£478m) first-half loss, and it tarnished 24.75p to 102.25p.
Underground engineering group Shaft Sinkers uncovered a 1p gain to 24.5p when it announced it had been selected as the preferred bidder for a $75m contact in Kazakhstan.
Quadrise Fuels International has closed a contract with shipping company Maersk to supply it with its "low-cost fuel", which is an alternative to oil, and it surged 2.13p to 14.9p.
Serial AIM entrepreneur David Lenigas's Rare Earth Minerals continued its climb. It confirmed it has increased its stake to 30 per cent in the prospective Fleur-El Sauz lithium project in Mexico earlier this week, and yesterday announced an estimated resource of 1,782,000 tonnes of lithium after drilling the first holes.
The stock, up 2055 per cent since the start of August, added 0.28p to 1.25p yesterday.
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