Market report: Retail investors light up Aga shares
Saturday 03 November 2012
What's cooking at Aga Rangemaster? Its shares were warmed up nearly 5 per cent during afternoon trade yesterday as retail investors started to snap up the stock. The cooker maker's shares had a terrible summer after it slashed its dividend to bolster its pension fund.
In the past two months shareholder Henderson Global Investors has sold most of its holding and the shares slipped to a five month low of 54.25p last month.
But yesterday the shares hit 58.5p with volume rocketing to more than 2 million, before edging back down and it ended up 1.5p at 57.12p. Traders think the shares sold by Henderson have now been absorbed, causing the mini spike in price.
The group has been trying to combat falling sales by going in to new markets such as China and analysts at Singer recently began covering the range maker and gave it a target price of 84p.
There was good news for drivers but bad news for shareholders at Admiral. Premium costs are coming down, but so is the turnover at the insurer.
For the third quarter to October, turnover fell by 2 per cent to £570m and its shares drove down more than 5 per cent, losing 61p to 1,081p.
The Association of British Insurers estimates that the growing number of personal injury claims has meant the UK motor insurance market hasn't made an underwriting profit for around 16 years. Insurers have been making money on ancillary income instead. Referral fees account for about 6 per cent of Admiral's UK car insurance profits. But the incoming ban on these fees next year is more bad news car insurers profits.
Investec downgraded the stock to sell with a share price target of 570p and said "paying 12x earnings for what is essentially a UK motor insurer is too much."
Direct Line also reported weak quarterly results yesterday and its shares travelled down 3.75p to 195.25p.
The FTSE 100 index hung on to yesterday's gains and moved up when healthy US non-farm payrolls data came in. But a sell-off stared during afternoon trade and the benchmark index ended up 6.63 points at 5868.55.
Fund managers are starting to think about what the Retail Distribution Review will mean next year. A report released by Fundscape this week warned fund managers will face increased competition from exchange-traded funds (ETFs) and investment trusts as investment advisers are more likely to consider these products now that they aren't just driven by commission. Fundscape reckons growth in funds under management will be very low or non-existent next year as the change takes place.
Concerns on how the review will hit wealth managers has already hurt Hargreaves Lansdown share price this week. Scribes at Citi issued a detail note on their view of what the changes mean and Hargreaves Lansdowne shares lost more than 4 per cent on Monday. They have since recovered and were up 15.5p to 762p yesterday. But the impact of RDR is still a concern and Robert Bailey, head of sales at Axa Investment Managers, thinks the FSAs plan to get greater transparency on the costs of the financial advice "will impact consumers, advisers and fund managers alike."
On the mid cap index some City traders were speculating a bid could still come in from Carlyle for defence equipment maker Chemring, despite many suspecting it will never materialise. The chat that a reduced bid of 350p a share could be put on the table. Its shares hurried up 16.7p to 277.3p.
The market was full of chatter on Nat Rothschild and Indonesian coal miner Bumi. Rothschild is assembling a counterbid to the $1.4bn offer made last month by the Bakrie family. Bumi issued a statement to say it had not received a proposal but Bumi jumped to the top of the mid cap index, up 34.7p to 283p.
Meanwhile, on AIM, the miner Aureus. is raising £50m in a secondary placing to finance the building of Liberia's first commercial gold mine.
Aureus, run by former Randgold Resources director and European Goldfields chief executive David Reading, is raising the money in the UK and North America through existing and new shareholders. Aureus already has a 25 year mining permit for the mine, New Liberty, and the financing enables it to be built. Its shares dug down 6p to 51.5p.
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