Market Report: Sceptics widen odds on bwin.party's US chances
Friday 22 April 2011
April has proven to be a dramatic month for bwin.party so far, and the rollercoaster continued yesterday as it slumped to the bottom of the mid-tier index. Declining 8.6p to 163.9p, the online gambling group was knocked back by sceptical comments over the chances of its being able to operate in the US.
The retreat was the latest in several important moves experienced by the product of the merger between PartyGaming and bwin, which began trading as a combined entity only at the end of March. Days after its debut, its share price slumped nearly 30 per cent in just two sessions, following the proposal of strict new regulations on gambling by German authorities.
Last Monday it managed to recover some of its losses by adding nearly 40p thanks to a crackdown in the US on poker sites in the country. The bust prompted hopes that it could mark the first step to online gambling being legalised and regulated in the States, which could provide a massive market for bwin.party. Yet Investec was rather more pessimistic yesterday, saying that "the operational and regulatory reality is much more mixed" than investors have judged.
Cutting his rating to "sell", the broker's analyst Paul Leyland added that its competitors involved in the seizureswould still provide formidable competition, noting that they "need to ensure their European liquidity lead and are likely to fight hard to keep it".
Meanwhile, he argued that – with potentially damaging proposals in Greece and Spain as well as Germany – more than 60 per cent of its earnings "can be seen to be at risk from regulation, with no clear view as to when 'market growth' will restore profitability to historic levels".
By the bell, gambling groups had book-ended the FTSE 250, with William Hill taking the top spot after the release of its interim management statement. The country's largest bookie shot up 14.8p to 213.3p after saying its net revenue had risen over 10 per cent in the first quarter.
The FTSE 100 spent most of the session in the blue but, as traders began packing up for the four-day weekend, it started heading south before closing 3.96 points lower at 6,018.3.
Tui Travel finished near the leaderboard's summit as market voices pointed to Deutsche Bank changing its dvice to "buy" ahead of next month's interim results as well as reports that its parent company, Tui AG, has asked for bids by the end of May for a stake in the shipping line Hapag-Lloyd. There has been persistent speculation that the German group will use the proceeds from a disposal of its shares to fund a move to reintegrate Tui Travel, which was bumped up 7p to 238.9p.
The gold-medal position was occupied by Autonomy, which made the rather unusual move of releasing its update half-way through the session, apparently because of "scheduling conflicts". The software group ended up rising 112p to 1,620p as its first- quarter figures came in above expectations.
Investors were keen on Barclays, pushing the bank up 4.45p to 298.85p ahead of its AGM next week which will also be accompanied by its interim management statement. Elsewhere in the sector, Royal Bank of Scotland advanced 0.56p to 41.8p after JP Morgan Cazenove increased its target price to 46p, although it did keep its "underweight" rating.
However Vodafone, which slid 7.6p to 169.05p, was hit by weak margins at its Verizon Wireless venture in the States, as well as a disappointing update from the Dutch telecoms group Royal KPN NV.
The surprise news that sales volumes grew 0.2 per cent last month failed to prompt any dramatic gains among the retailers, although Supergroup and Dixons did tick up 58p to 1,532p and 0.07p to 13.79p respectively.
The re-emergence of yet more takeover speculation helped Burberry shift forwards 27p to 1,271, with vague talk spreading of interest from the Far East in the luxury brand.
Next also finished ahead, moving 46p higher to 2,239p, as Morgan Stanley said it was one of "a number of good-quality companies that we believe are now very attractively priced for longer-term investors". In fact the broker was fairly positive on the sector as a whole, saying that share prices "have probably bottomed", although its analysts did warn they did not expect a particularly sharp bounce.
Ferrexpo was still powering up in the wake of the emergence of bid speculation on Wednesday, adding 17p to 481p. The iron ore producer has now seen its share price rise nearly 10 per cent since market gossips linked it to a potential approach from a number of companies including Rio Tinto – up 36p to 4,402.5p – and Vale.
Down among the small-cap stocks, Flying Brands soared 2.25p to 28.75p after the flower delivery group announced it had agreed a deal with Debenhams – 0.85p ahead at 67.84p – that will see it offer a special wedding service to the department store's customers.
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