Market Report: Pace still a runner in race for Motorola

 

Can a Yorkshire firm keep up with the pace in the bidding war for Google's Motorola set-top box business? The official deadline was last night, and Saltaire-based Pace was said to be up against Georgia-based Arris, France's Technicolor and private equity bidders.

Some claimed the deadline could be extended, but a price of up to $2.5bn (£1.5bn) has been mooted for the Motorola box business.

Analysts have doubted the likelihood of Pace being able to finance the potential deal, but one US press report suggested that Google could consider funding the buyer.

Pace has had a mixed year. Its deal to supply BT with boxes hit problems when it emerged the equipment did not meet BT's requirements. But it recovered from supply shortages that it had experienced after flooding in Thailand last year.

Pace became the biggest maker globally of set-top boxes by volume two years ago. Its shares programmed in a 2.3p rise to 191.8p on the mid cap index.

Over on the blue-chip index, negative news emerged during morning trade with worse-than-expected German GDP forecasts and UK industrial production data. But better news came after lunch when good US unemployment figures pushed the index up 30 points – a mini spike. The figures showed that joblessness had fallen to a four-year low, but there was no major rally in the City. The FTSE 100 index might be at six-week highs, but traders haven't felt positive enough to push the index above the coveted 6,000 mark.

The index ended up 12.98 points to 5914.4.

One of the fallers on the benchmark index was the miner Xstrata after its merger with Glencore hit a potential hurdle the previous day. Xstrata lost 6.5p to 1,035p after the energy group Eskom raised concerns about how the deal will hit coal supplies. Glencore lost 0.5p to 345.2p.

The mighty Goldman Sachs cast its eye over our high street yesterday and said it is time to flog shares in Marks & Spencer ahead of the Christmas rush. The Goldman analyst Rob Joyce thinks returns at the bellwether will "remain under pressure" because the chief executive, Marc Bolland, is continuing the store's investment strategy. He says that despite a move to grow online sales, returns will not improve given the firm's heavy investment in stores and the fact that it owns the freehold of so many of its shops. His bearish view comes as the retailer announced extended opening hours in the run-up to Christmas.

Mr Joyce does admit that if consumption picks up next year his outlook for the retailer might change. But for now it's a "sell" with a price target of 360p.

M&S might not have appealed but it was a different story for Next, which got at least lukewarm praise. Mr Joyce gave the fashion retailer a "hold" rating and a share-price target of 3,800p. He thinks Next has a good "cash return on cash invested", which is driven by the growth of its profitable and low capital-cost online business.

Investors agreed with Mr Joyce: M&S declined 4.2p to 393.6p, while Next lost 8p to 3,704p.

On Thursday, Liberum Capital's analysts issued a "buy" note on the drinks giant Diageo. Yesterday Berenberg Bank's analysts followed suit. The Guinness-owner rose 24.5p to 1,878.5p, bubbling up towards the top of the blue-chip index. It will be hosting a conference call on its American business next week, and Berenberg's Philip Morrisey thinks it will be cautiously optimistic, given this year's robust performance of US spirits sales. It gave the shares a price target of 1,760p.

Over on the mid-cap index, the perennial bid target Informa got a "hold" rating from analysts at Liberum, who said they are "sceptical on corporate activity" and gave the publisher a share price target of 450p. The shares fell 3.2p gain to 433.2p.

Now over to the Aim-listed miners. Tin miner Wolf Minerals has secured funding to dig up tin in Devon. It has agreed a deal with Resource Capital Fund to develop the Hemerdon Tungsten and Tin Project. Its shares lifted 1.62p to 15.38p.

Bad news for miners in South Africa again. Coal of Africa sacked 178 miners at its Mooiplaats mine after they began a strike on Monday. Its shares inched up 0.12p to 12.5p.

Russia's best-known jeweller – Fabergé – will be getting some more stones of the scarlet variety for its collection. Its new parent company, the miner Gemfields, is buying another ruby deposit next to its Montepuez ruby mine in Mozambique. But the shares edged down 0.25p to 30.5p.

Buy

Topps Tiles

"Poised and ready," is what Peel Hunt has to say about Topps Tiles as it suggests we snap up shares in the retailer. The broker says the business "remains highly geared into consumer recovery, with no structural impediment blocking a return to peak profitability". Wow! The shares are presently at 48.25p but Peel Hunt gives a target of 60p.

Sell

Premier Farnell

Seymour Pierce urges us to dump shares in Premier Farnell in a note headed "Far from premier results", referring to last week's numbers. The broker says it's "too early to call the bottom of the cycle" for the electronics group. The shares are 183p; Seymour gives a target of 160p.

Hold

PZ Cussons

Hang on to shares in Cussons, Investec advises. The broker says that "after last year's challenges" the Imperial Leather-maker "looks set to release a solid result for the first half… marking its return to profit growth driven by the recovery in Asia". It has raised its price target to 335p from 300p for the shares, which are at present around 353.9p.

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