Market Report: Sage eases up despite fears of difficult year
While the Footsie closed deep in the red last night, Sage was kept afloat on hopes that the business software group will avoid the woes of its peers. The consensus in the City may be that the sector is facing a difficult year ahead as firms cut spending on IT, but Sage was picked out yesterday by Bank of America Merrill Lynch as one of the names still worth buying.
The group eased up 1.7p to 294.75p as Chandramouli Srirama, an analyst at the heavyweight broker, upgraded his advice to "buy" despite being generally downbeat on the European software and IT services companies.
In particular, Mr Srirama praised Sage as a defensive haven for punters, claiming it will outperform its rivals because roughly two-thirds of its revenues come from subscriptions.
He also pointed out that its shareholders are in line for a treat, calculating that the group's dividend plans meant they are set to receive a total of roughly £650meither through Sage buying back shares or issuing extraordinary dividends.
The analyst was much less keen on Logica, and as a result the troubled IT firm was driven back 4.35p to 65.95p on the mid-tier index. Following on from its profit warning last month – the company's third of 2011 – Mr Srirama removed his "buy" recommendation and slashed his target price by nearly a third to 75p.
Sage and Logica were not the only technology stocks in focus, as Arm Holdings climbed 15.5p to 610p. Dealers were putting the move down in part to Apple's recent announcement that the iPhone 4S – which uses Arm's technology – is about to go on sale in China, while the Cambridge-based group was also given a helping hand by UBS's decision earlier in the week to add it to the broker's "most preferred" list of stocks.
Overall the FTSE 100 continued to decline, slipping 44.19 points to 5,624.26, despite jobs data from the States beating expectations. However, it was Europe and not the US that the Square Mile focused on, with yet more concerns over France's triple-AAA credit rating as the country's latest debt auction saw yields rise.
The eurozone banks – surprise, surprise – were causing more than a few raised heartbeats in the City. While Italy's Unicredit continued to fall after its rights issue on Wednesday was priced at a major discount, Deutsche Bank became the latest to find itself hit by by capital-raising fears.
Vague rumours spread across the City in early trading suggesting that Germany's largest bank could be about to launch its own rights issue, although Deutsche Bank declined to comment while reports denied the speculation.
Nonetheless, as Lloyds dropped 0.25p to 26.35p while Royal Bank of Scotland was knocked back 0.49p to 20.27p, there seems little chance of the issue going away with Guardian Stockbrokers' Atif Latif warning that "many of the EU banks will have to raise capital over the coming months".
While the miners generally suffered from a lack of risk appetite among investors, Eurasian Natural Resources ended up as the benchmark index's top performer. The digger surged up 30.5p to 695p after agreeing a deal to end its dispute with Canada's First Quantum Minerals over a project in the Democratic Republic of Congo.
Takeover rumours continued to swirl around Afren as the oil explorer jumped up 6p to 105.4p. With vague bid speculation doing the rounds for a while now, one wild tale yesterday suggested EnQuest (up 3p to 101.3p) as a possible suitor, although – given it is smaller than Afren and focused on a different part of the world – the idea was widely rubbished.
Traders instead speculated that if an offer did emerge it would come from a much bigger oil company. However, others argued that Afren was in fact still being pushed up by its stellar production update issued earlier in the week.
Elsewhere in the sector, Ophir Energy – which many believe will be a star performer in 2012 – claimed the FTSE 250's gold medal after powering forwards 20.3p to 318.8p.
Meanwhile, its fellow Africa-focused explorer Cove Energy ticked up 10.89 per cent to 124.75p on AIM after announcing it is open to takeover offers.
Gulf Keystone Petroleum was once again attracting some optimistic buying as the Kurdistan explorer – a favourite of the punters and the frequent subject of bid talk – advanced 11p to 01p.
Games Workshop was in storming form after the Warhammer game manufacturer revealed there was still plenty of demand for its model orcs. The group announced a 43 per cent jump in its first-half net income, while also unveiling a 29p dividend, all of which helped it to shift up 40p to 490p.
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