Market Report: Resolution gets a result for Cowdery
Saturday 13 April 2013
Clive Cowdery's Resolution was in demand yesterday following upgrades from brokers at Barclays Capital and JP Morgan. Analysts at BarCap seemed enthused by a meeting with the insurer's management, who are crunching together the Friends Provident, Axa Life and Bupa businesses that Mr Cowdery acquired after launching the company in 2006.
"We spent time with Resolution's management last week, and our key takeaway is that the attractive dividend (8 per cent yield) is increasingly well covered, with the potential for dividend growth as underlying cash generation improves towards its £400m target by 2015.
"While we expect the first half of 2013 to show continued progress in both its UK and international operations, we believe 2013 performance will be second-half loaded, with significant progress coming through towards the end of the year."
Brokers at JP Morgan also raised their target price on the stock from 257p to 273p, helping the company's shares to rise 3.2p to 274.3p.
In a wider sector note, JP Morgan also praised Standard Life, which it described as the "best capitalised insurer in the UK". Standard Life shares climbed 3.80p to 350.4p.
Overall, the FTSE 100 dipped 31.75 points to 6,384.39, while the wider FTSE 250 fell 61.28 to 13,906.8. William Nicholls, a dealer at Capital Spreads, said: "This week the FTSE 100 has had its best four-day streak since January, and it now seems timely and logical going into the weekend that it has run out of steam, particularly ahead of news from the Euro 'FinMin' meeting in Dublin. There are fears that the Cypriot government will have to find an extra wodge of cash from down the back of the sofa to help finance their own bailout. Understandably, this news has had a more adverse affect on eurozone member states relative to the UK – the Dax has dropped well over 1 per cent of its value."
Torben Kaaber, the head of Saxo Capital Markets UK, said: "After a day of strong gains in Europe yesterday, today we saw the fragility of markets in a state of confusion… . Eurozone industrial figures were healthier than expected, but the panic button was hit as soon as Cyprus's request for greater technical and structural support was initially misinterpreted by the markets as a plea for further bailout loans.
"Stock markets largely divorced from economics and based on sentiment and confidence are prone to large, mercurial swings as long as uncertainty remains."
The chemicals company Johnson Matthey was one of the day's best performers after UBS raised its rating to buy. Analysts at the bank think they've been "too cautious" with the specialist chemical firm, and say now is a good time to get into shares. Johnson Matthey shot up 64p to 2,415p.
It was a different story for the chemicals maker Croda, which trailed the index this morning after UBS cut its rating to sell. The bank reckons the Yorkshire firm has lost its momentum, with earnings flat or declining. UBS think Croda needs at least one quarter of convincing profit growth to get its mojo back. Shares tumbled 106p to 2,608p.
The Chile-based copper miner Antofagasta was one of the blue-chip index's best performers as Chinese demand for the metal pushed prices up. Despite Antofagasta's chief executive Diego Hernandez warning that the high cost of energy in Chile was threatening the industry's competitiveness, traders reckoned the miner still has life in it before a late fall saw the shares close down 2p at 1,013p.
Further down the scale, those scribblers at Canaccord Genuity couldn't get enough of SuperGroup. The fashion retailer launched a women's range designed by the British tailor Timothy Everest at its Regent Street Superdry store on Thursday, and Canaccord's Wayne Brown loved it. He said: "The bold designs are striking, but it is the attention to detail and high standard of design and fabrics that makes this range unique."
Mr Brown reckons the range could be "transformational", and said SuperGroup is creating a "scaleable proposition with global appeal". He rated the group as a buy, and the markets agreed: SuperGroup added 19p to 694p.
Elsewhere in the fashion world, the luxury handbag maker Mulberry was doing storming trade after a vote of confidence from the management. The non-executive director Melissa Ong snapped up 10,000 shares in the firm, taking the Ong family's holding in the company to 56.1 per cent. The punters decided to follow her lead and Mulberry jumped 34p to 980p.
Snap up shares in the recruitment specialist Hays, Shore Capital recommends. The broker is enthused by the recruiter's third-quarter numbers last week, and has raised its stance from a hold. It says the update gives "encouraging signs feeding through in the UK … with public-sector churn rising". Despite the ongoing impact of the financial crisis, the shares are 100.2p, which is just right, Shore says.
Dump shares in the housebuilder Persimmon, Panmure Gordon warns. The broker is sure that when the company updates the market on Thursday, it "will report a strong trading period". However, it adds that "valuations have run a little too far" and gives a target price of 815p for the shares, currently at 1,123p.
Hang on to shares in SuperGroup, Peel Hunt advises. The fashion retailer and owner of the Superdry brand – which performed so strongly on Friday – launched its new womenswear range at the end of last week, and the broker feels this is "a great extension to the brand". It notes also that the response to the current ranges has been "strong". The company's shares are 694p, with a 650p target.
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