Market Report: Plain sailing for cruise operator Carnival
Friday 04 September 2009
In these troubled times, what better than to get away from it all on a nice boat trip to, say, Hawaii or Alaska. Analysts at Credit Suisse were certainly recommending that investors carry on cruising yesterday, as they threw their support behind Carnival.
The Swiss broker raised its target price for the ocean liner company (catchphrase: "proof that fun floats") from 1,820p to 2,099p and reiterated an "outperform" rating. "We expect solid third-quarter results later this month, given ongoing trends towards stable prices, good late demand and improving early bookings," it said in a note, adding that the cruise industry was stabilising, customers were booking in droves and reaching into their pockets once on board.
Credit Suisse said: "Conventional logic suggests two years of yield declines as consumers and travel agents adjust and take time to accept rises. We expect yields to turn positive in the second quarter of 2010."
There was still little excitement in the London markets yesterday, with the FTSE 100 edging up a couple of points before being dragged down by weakness across the Atlantic.
Miners were back in vogue after falling heavily out of favour after the bank holiday, and it was all eyes on China. Commodity price falls reversed and the support for gold and steel on Shanghai's Composite Index sent ripples to London. Randgold Resources charged up 9 per cent to close at 4,022p.
Seven of the top 10 risers were mining companies, including Fresnillo, which rose 8.6 per cent to 655p. A cracking note from RBC Capital Markets sent Lonmin soaring by 5.95 per cent to 1,442p. The Canadian broker raised its rating from "sector perform" to "outperform" and, out of nowhere, pitched the idea that a takeover bid for Lonmin by Xstrata had "increasing potential".
Leon Esterhuizen, an analyst at RBC, said: "We believe the key factor differentiating Lonmin from the other majors is that Takeover Panel restrictions on a potential acquisition by Xstrata, which has a 25 per cent stake in Lonmin, end in early October. With a merger of Xstrata and Anglo American looking ever less likely, we believe a Lonmin acquisition looks more so."
The hoo-ha surrounding insurers quietened a touch. Fears about the prospect of EU regulators forcing a top-up of capital provisions to the tune of about £50bn has not so much receded as failed to intensify. Prudential was the pick, up 1.85 per cent at 524p.
There was a semblance of security back in the banks. British lenders had suffered after a negative read-across from the US on Wednesday, but yesterday they found buyers again with Royal Bank of Scotland the most successful as it rose 3.1 per cent to 55p. The bank bucking the trend was Barclays, which fell 2.1 per cent to 351.3p.
Worst on the day was Experian, which tumbled 3 per cent to 499.3p after a sustained lift in the past month. As the market struggled for direction, investors were less focused on the defensive strategy of the previous day. Pharma stocks spiralled lower. GlaxoSmithKline bore the brunt and was down 2.24 per cent at 1,177p. British American Tobacco sank by 2.09 per cent to close at 1,876p.
Diageo, the world's largest spirits maker, needed a bit of Dutch courage as its rival Pernod Ricard predicted a tough year for the industry. Pernod posted a 21 per cent rise in profits but would not give forecasts for its full-year prospects. Diageo closed down 1.6 per cent at 953p. Meanwhile, JP Morgan said it viewed UK water stocks with more balance after two months of underperformance, but added that it did not yet see "enough upside to move to a positive stance". It said an interesting pair trade would be long United Utilities, and short Severn Trent. The latter promptly fell 1.13 per cent to 960p.
Shares in National Express were fast and furious yesterday as they dominated the second tier. The bus and rail operator was soaring after Cosmen and CVC Capital Partners came back to the table with an increased 500p-per-share bid, valuing the group at £765m. It closed up 13 per cent at 465.9p. Bumping along in its wake was rival Stagecoach, which closed 11 per cent higher at 145.9p
McBride, the household products maker, closed 5.70p higher at 160p after reporting that its annual profits had soared by 34 per cent to £36.2m. Investors were further cheered as the group said its new financial year had started well and it was comfortable with analysts upping their forecasts.
One stock whose results had the diametrically opposite effect on its share price was Premier Farnell, the electronics group. After its profits fell by 10 per cent in the second quarter, its shares slumped by almost as much, losing 9.82 per cent to close at 147p.
Investors in the gambling software group Inspired Gaming were shouting "house" after it secured a deal to provide Gala Bingo with 3,600 more handheld bingo devices. The news sent Inspired's shares up 23 per cent to 9.8p.
Shares in EcoSecurities, a carbon trading company, rose by 2.8 per cent to 88p after one potential bidders in a takeover battle pulled out. Tricorona of Sweden said it would not proceed with an offer.
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