Market Report: Profit-taking takes the shine off Derwent's stock

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The Independent Online

Derwent London was under pressure last night as traders banked profits on the view that it may already be pricing in the positive outlook for the capital's property market.

The stock was marked down by 33p to 1,735p, while developer Great Portland Estates lost 5.3p to 406.8p on the warning from UBS. In Great Portland's case, the bank said the shares were reflecting much of the increase in Central London developments planned for this year. "The share price appears to be forward-looking as it does not allow for much execution risk," it warned, moving Great Portland to "sell", albeit with a revised 390p target, against 350p previously.

When it came to Derwent, the broker said the group boasted "significant medium-term potential, with a number of major schemes" expected to start after next year. But the share price "is already factoring in the impact of the longer-term programme", it warned, lowering its recommendation to "sell". Once again, UBS softened the blow by raising its target price for Derwent to 1,700p from 1,550p previously.



Europe was the main talking point of the day after Standard & Poor's announced yet another cut in Greece's credit ratings to B from BB minus. The downgrade came on the heels of speculation that the country may end up in need of another EU-sponsored lifeline amid fears that it might not be able to access the capital markets to refinance its debts.

S&P pinned its action on concerns that a debt restructuring was becoming increasingly likely.

The prospect triggered an outbreak of nerves across the London Stock Exchange, dragging the benchmark FTSE 100 index down by more than half a per cent or 34.08 points to 5,942.69. The mid-caps were also caught in the sell-off, and the FTSE 250 was slightly behind, down 11.15 points at 11,896.09.

The worries did nothing to help the banks, who were already under the cosh as investors factored in the likely hit from claims over the mis-selling of payment protection insurance (PPI). Lloyds, which was 0.4p lower at 53.58p, shocked the market by putting aside more than £3bn to cover claims last week – and yesterday Barclays, down 3.65p at 273.95p, said it was taking a £1bn charge for the same reason.

HSBC, which was in focus after posting lower quarterly profits, took a smaller $440m (£270m) charge to cover costs related to PPI claims. News of the provisions came as the banks decided against appealing a ruling requiring them to pay compensation to wronged customers.

HSBC was 3.5p down at 648.2p, while the Royal Bank of Scotland fell by more than 2 per cent or 1.04p to close at 41.7p. The weakness in the latter came as JP Morgan Cazenove, which has an "underweight" rating on RBS, scaled back its target for the stock to 44p from 46p.

Away from the banks, Centrica took the FTSE 100 wooden spoon, with the British Gas-owner slumping to 303.5p, down 3.8 per cent or 12p, after warning that rising taxes on North Sea oil and gas production would hit earnings growth. The move down came despite some supportive comment from analysts, with Investec pointing out that "despite higher taxation, earnings are still set to grow".

Turning to the upside, and the software firm Autonomy was in good form, rallying by 63p to 1,675p after Numis abandoned its "reduce" stance, moving to "add" as it spied the potential for upside gains. In the wider sector, Sage was 4.6p better off at 285.8p, while mid-cap peer Misys rose by more than 8 per cent or 26.5p to 343.5p following a plug from Credit Suisse.

"Misys reports results, including the recently acquired Sophis TCM business, in July – an event [which] we believe should give investors confidence in combined estimates and could prompt a positive re-rating," the broker said, reinstating coverage on the stock with an "outperform" stance and a 420p target price.

Credit Suisse was also positive on Bodycote, the engineering group which was slightly lower, down 3.2p at 382.7p, as the broker revised its target price for the stock to 410p, compared with 335p previously.

The broker said that while the company had delivered four quarters of positive surprises and upgrades, it continued to "see a solid investment case" based on expanding margins and in light of the scope for yet more earnings surprises in the near term.

IMI, whose target price was raised to 1,010p from 940p by Credit Suisse, was 23p ahead at 1,081p.



The rumour mill was spinning wildly around Kesa Electricals, the retailer which was once the again the subject of chatter that it might have roused the interest of private equity investors.

While no names were mentioned, and although the electicals group has been the subject of deal speculation in the past, the market appeared to be willing to take a punt on the latest instalment of rumours, with the stock climbing by 1.9p to close at 139p.

Inmarsat 619p (up 26p, 4.4 per cent) Satellite group rallies after posting a strong update on the first three months of the year.

Lonmin 1,562p (up 13p, 0.8 per cent) Gains ground as half-yearly results please; Evolution Securities ups its on the miner stance to "add".

Admiral 1,701p (up 4p, 0.2 per cent) Credit Suisse revises its target price for the insurer to 1,728p, compared to 1,662p previously.

Standard Chartered 1,572p (down 31.5p, 2 per cent) Retreats with the wider banking sector amid worries about Europe's debt woes.

Smiths 1,210p (down 9p, 0.7 per cent) Falls back as Credit Suisse revises its target price for the aerospace group to 1,400p from 1,430p.

Tui Travel 243.6p (down 1.2p, 0.5 per cent) Eases on the read-across from sector peer Thomas Cook, whose half-yearly results disappoint.

Micro Focus International 385p (up 12.2p, 3.3 per cent) Software group's pre-close trading update reassures; Collins Stewart ups its target to 358p

Rank 151.6p (up 2.8p, 1.9 per cent) Mecca bingo group turns down Guoco's 150p per share offer, saying it "undervalues" its business.

Rightmove 1,091p (up 6p, 0.6 per cent) Rises after Goldman Sachs revises its target price on property website to 1,430p from 1,083p.

Telecity 513.5p (down 17.5p, 3.3 per cent) Data centre group says its eyeing acquisition opportunities in existing and new European markets.

Thomas Cook 165.7p (down 4.9p, 3 per cent) Tour operator falls after posting a disappointing outlook in its half-yearly results.

Shaftesbury 503.5p (down 5.5p, 1.1 per cent) UBS revises its target price to 490p on property group, but reiterates its "sell" recommendation.

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