Market Report: Sage feels the heat over Brazil venture
Could the carnival be over for Sage? An accountancy software specialist and one of the world's most exciting and colourful countries may not seem like natural bedfellows, but Sage's decision to enter Brazil has been welcomed by the City – until yesterday, that is.
In the wake of the group revealing last month that it was buying the Brazilian software provider Folhamatic Group in a deal worth £125m, its share price had jumped about 18 per cent in just six weeks.
Yet not everyone is so impressed – Peel Hunt's Paul Morland claimed yesterday that "the market has overreacted" to the acquisition. While the analyst conceded it "was a sensible strategic move and increases the group's growth potential", he added that the size was "much too small to make any meaningful difference".
At the same time ,Mr Morland suggested Sage "may struggle" to meet its guidance for the year, and – saying he believed the stock was "starting to look expensive" – told investors to get selling.
It was also being hit by negativity from the analysts at UBS. They downgraded their "buy" recommendation to "neutral" following the recent rally, while also warning that Sage's shift in strategy towards cloud computing was "in its earliest days, and has risks".
The two downgrades left Sage as one of the worst fallers on the blue-chip index, with the group moving down from its highest share price for nearly a month, dropping 11.4p to 287.5p.
After three days on the rise, which saw it add nearly 200 points, the FTSE 100 closed 58.35 points weaker at 5,6325.28. As well as some profit-taking, the move was being pinned on some caution among those hoping stimulus measures will emerge from the various central banks meetings this week.
A number of commodity stocks were among the list of winners, with Vedanta Resources the best performer – the India-focused digger advanced 48p to 976p after announcing a 27 per cent jump in its core earnings over the first-quarter.
However, Anglo American missed out, sliding 17.5p to 1,900p. The miner's $5.1bn (£3.2bn) deal to take hold of 85 per cent of De Beers will go ahead as planned after the Botswana government announced that it had decided not to take up the option to increase its stake in the diamond producer.
Weir's first-half results were being taken badly. The pump maker – a particular favourite of the short-sellers – was driven back 49p to 1,655p despite announcing in-line numbers, although bosses were cautious over its oil and gas operations.
Its rival HeidelbergCement may have beaten profit expectations with its latest figures, but the results from the German giant were still being seen as bad news for CRH. T he Irish building materials group crashed down 71p to 1,160p after worrying comments from the cement maker on Poland and the Netherlands, two of CRH's major markets.
A number of people in the Square Mile were switching off ITV after Deutsche Bank's Laurie Davison turned into a seller. While the analyst noted the broadcasters are starting to accept that this will be a weaker year for advertising, he warned that they seem "largely in denial about next year, assuming a rebound in growth."
However, with no major events to match the Diamond Jubilee, Euro 2012 or the Olympics, he added that 2013 is not likely to be any better than this year as ITV retreated 1.3p to 75.5p.
Down on the FTSE 250, analysts were talking up Man Group to no avail. Citigroup's analysts kept their "buy" rating on the troubled hedge fund giant and upped their target price to 90p while saying there was "further upside in the event of a longer-term fundamental recovery".
Meanwhile, Arnaud Giblat from UBS reiterated his "buy" recommendation, although he did take the stock off the broker's "most preferred" list following its recent rally, as Man slipped back 2.55p to 79.65p.
It seems like the troubles on the High Street are not hurting the demand for model orcs. Games Workshop ticked up 10.5p to 587.5p after the Warhammer game maker announced that its pre-tax profits for the year had risen by more than £4m to £19.5m.
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