Market Report: Scandal-hit ENRC falls deeper into hole
Wednesday 01 May 2013
If it were possible for scandal-hit Kazakh mining outfit ENRC to lose more credibility – yesterday it did as another rating agency downgraded the group's credit rating further into junk territory.The company is being investigated on corruption allegations by the Serious Fraud Office across its Kazakh and African operations.
Standard & Poor's has downgraded its credit amid fears the company may not be able to attract additional funds to finance its operations.
News of the SFO investigation last month was evidence to support those in the City who said the group should not have ever listed in London due to its continued corporate governance issues.
The latest blow comes as its founders are trying to raise cash to take the miner private. Alexander Machkevitch, Alijan Ibragimov and Patokh Chodiev have a 17 May put-up-or-shut-up deadline to make a bid. The consortium is holding talks with Russian lenders and is reported to be looking at a sell-off of assets to cut group debt if it is successful.
Many investors have already cut their losses and run – the shares have fallen more than 50 per cent since it listed 2007. The saga of the miner is being closely watched, especially by those who piled in at the bottom earlier last month – when shares were around 224p. Yesterday the shares dipped 0.4p to 274.4p.
Traders attributed the decline in the blue chip index to investors taking profit ahead of central bank meetings this week. The FTSE 100 lost 27.9 to 6430.12.
Despite the slip, the index reported its longest- ever period of monthly gains. It finished April up 0.3 per cent – its longest stretch of monthly gains since 1984, according to Bloomberg data.
Financials were in favour after Lloyds Banking Group's promising first-quarter update. Details of the new capital requirements in the UK are expected in the next month and Lloyds increased by 0.83p to 54.33p. Royal Bank of Scotland took top spot, up 12.3p to 306.3p.
There was more chat about fantasy M&A for telecoms group Vodafone yesterday when analysts at Citigroup speculated on Vodafone buying Liberty Global. The market was non-plussed and Vodafone hung up 0.65p to 196.2p.
The oil giant BP produced a forecast beating profit of £2.7bn in the first quarter and its shares jetted 9.65 to 466.4p. Fellow oil major Shell has beaten France's Total to a giant gas field project with Abu Dhabi National Oil. The deal was announced during a visit to the UK by UAE President Sheikh Khalifa bin Zayed al-Nahayan. David Cameron said the Shell deal "highlights the UK's world class energy sector." Shell jetted 10p to 2,253p.
British Gas owner Centrica was out of favour with Credit Suisse which thinks "ongoing weak high street conditions and fiscal austerity" will mean further strain. Credit Suisse slashed its rating to underperform from neutral. Its concerns come ahead of Centrica's first-quarter update on 13 May. Credit Suisse is concerned "results in business energy and home services could be at risk", and that the stock looks expensive compared to peers, trading on 12.8 times 2014 earnings. Punters took note and it hissed down 8.6p to 371p.
Over on the mid cap index, the US fund Vanguard upped its stake in Peter Hambro's Petropavlovsk. The fund, founded by US star John Bogle, now has more than 8 per cent of the gold miner, which retreated 9p to 145p.
Engineer Invensys continued to be powered by takeover speculation. It was lifted for a second day – up 19.9p to 384.7p – following a buy note from Société Générale. JP Morgan took a look at Capital & Counties, the property company behind Earls Court and Covent Garden, and rated it overweight with a 365p price target for shares that built up a 3.3p gain to 308 p.
Sausage maker Cranswick gobbled up pig farmer East Anglian Pigs, which Numis analysts think will give it "control of the supply chain and should be a modest plus for sentiment". Cranswick put on 3p to 1,057p.
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