Market Report: Odds against Bwin.Party in Europe make it a loser
Friday 16 March 2012
The Cheltenham Festival may be coming to a climax, but punters were deciding that Bwin.Party was too much of a long shot yesterday. The online gambling group was left near the back of the pack thanks to fears over the cost of a tough battle ahead with its rivals in Europe.
A number of countries on the continent are introducing online gambling regulations this year, which will bring with it an increase in tax costs. As a result, warned Macquarie Capital's Angus Tweedie, the sector will have to splash out an increasing amount on advertising in order to gain enough of a market share to make the economics work.
He pointed out that a third of Bwin.Party's revenues come from markets which are expected to regulate this year, saying that therefore it was likely to be the worst hit in the sector by the increased marketing costs required.
Mr Tweedie – who has an "underperform" rating on the group – went on to slash his target price to 145p, prompting it to slump 8p to 153p.
Overall, the FTSE 100 continued to lack direction as it edged down another 4.71 points to 5,940.72.
"The overriding feature of today has been the quiet," said IG Index's Yusuf Heusen, with even positive manufacturing and employment data from the US failing to excite.
Next closed near the summit after optimistic buying ahead of the retailer's preliminary results which are due next week. Both Panmure Gordon and UBS reiterated their "buy" advice, with the former's analyst, Jean Roche, claiming that the group's guidance for the current financial year was "probably too conservative".
Having been hit by fears over China earlier in the week, many heavyweight miners were back in favour, including Rio Tinto which advanced 67.5p to 3,547.5p, while Anglo American ticked up 17.5p to 2,581.5p.
With the latter releasing its annual report, market gossips pointed to chairman Sir John Parker's comments that the digger would "continue to examine M&A opportunities as one of our strategic priorities". As a result, they linked this to oft-floated speculation it could make a move for US coal producer Walter Energy, although traders were unimpressed. At the same time, vague rumours were also being revived in the US claiming "sage of Omaha" Warren Buffett could be looking at a potential acquisition in the coal space.
Shire ended up taking the wooden spoon following the pharmaceutical group's decision late on Wednesday to withdraw its US FDA application for Fabry disease drug Replagal, blaming fears the regulator would demand further clinical trials. The group was driven back 70p to 2,158p, with it also announcing it had agreed to snap up US firm FerroKin BioSciences in a deal that could be worth up to $325m (£206.6m).
Tesco was also in the red, sliding 3.1p to 321.75p on the news that the head of its UK operations, Richard Brasher, is to leave the supermarket in July.
The top bosses in the property sector were on the receiving end of a rather stark warning, as JPMorgan said they either need to "speed up or find a bride", otherwise they risk being "shipped out".
Analysts from the broker claimed the recent acquisition of nearly 29 per cent of shopping centre operator Klepierre by US firm Simon Property should act as a "wake-up call", warning that "predators will exploit their relatively low cost of capital" to make M&A a major theme.
With the property companies trading at a large discount to the value of their assets, the scribblers argued that "the whole European sector looks vulnerable" and chose Hammerson – which climbed 0.7p to 420.8p – as one of a number of potential bid targets.
Misys retreated 2.5p to 322.5p ahead of Monday's deadline for private equity firm Vista to decide whether to make a bid for the software group. Its Swiss rival, Temenos, which pulled out of the race earlier in the week, released a cautious trading update late on Wednesday, and Espirito Santo said it, "clearly has negative implications for the potential price" Vista or the other possible bidder – a team-up between CVC Capital and ValueAct – could offer.
Domino Printing Sciences was the horror show of the day. The industrial printer slumped 15.52 per cent to 560.5p after warning that, with times tough in Europe as well as a drop in major projects from China, its sales were unlikely to rise this year.
Down on the small-cap index, Game Group rocketed up 64.29 per cent to 3.45p in response to the news that OpCapita may make a rescue bid for the troubled video games retailer.
Meanwhile, Serica Energy spurted up 2.25p to 31.5p after the oil group signed a deal with sector giant BP (6.3p worse off at 492.75p) to search for black gold off the Namibian coast.
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