Market Report: Smiths is tipped to join assets sale track


Siemens' shock swoop on Invensys' rail signalling business last month has got the City chatting about what other clever deals could be worked up in the new year.

Prior to Siemens making its move, most thought Invensys' unpalatable pension problem would put the kibosh on any deal.

But Siemens pulled it off by buying part of the group – the UK rail business in a £1.7bn deal – and now there is hope for others, analysts at Deutsche Bank reckon.

The focus turned to blue-chip technology expert Smiths Group. Smiths has already entertained an approach for its medical business before. In January last year, it turned down a £2.45bn bid from Apax.

But Deutsche's Martin Wilkie and Peter Reilly think "that the template of the Invensys rail disposal to Siemens suggests disposals for Smiths could come sooner than we'd previously thought".

They are so encouraged a deal might occur they upgraded their rating to buy and gave it a share price target of 1,335p.

They think it was the pension problem that caused the deal to go off the boil as it "may have required a top-up post any disposal".

But "the read-across from the structure of the recent sale of the Invensys rail business to Siemens warrants a rethink as to how much of a poison pill the pension really is for Smiths to sell assets".

Smiths has already said it wants to look at its portfolio but Deutsche's team note that so far "it has limited itself to bolt-on M&A".

The City is always predicting M&A action, so there will be hope that Deutsche's theory turns out to be right. The shares, which have gained more than 12 per cent in the past five weeks, were static at 1,145p.

Traders were nursing hangovers from Christmas parties for most of the past week with the name of the game to avoid being in the office as much as possible to avoid the rather dull market despite the benchmark and mid-cap index reaching highs.

The FTSE 100 index has been making slow but steady progress this month. But yesterday investors were weighing up mixed data. The UK's construction sector improved giving hope of an improved economy; construction output increased by 8.3 per cent in October. But concerns about weak United States data and the still unresolved US fiscal cliff meant the index did not stay in positive territory and it lost 7.85 points to 5921.76.

Insurance groups were out of favour and Prudential was the biggest faller, down 17.5p to 881p, while Aviva lost 2.9p to 369.9p.

Oil giant BP was back in focus after Credit Suisse's energy expert took the red pen to their rating. Its Gulf of Mexico oil spill in 2010, the largest accidental marine oil spill in the industry, and subsequent legal claims, sent the shares from a high of 643p in April 2010, to as low as 308p. But Credit Suisse's Kim Fustier thinks the time to snap up the stock on the cheap has passed.

She downgraded BP to neutral from outperform and slashed the target share price to 475p. So where to put your money if you want to sink it into oil? Ms Fustier likes Shell and upgraded it to outperform. BP's shares declined 2.3p to 426.45p and Shell's B shares trickled down 2.5p to 2,198p.

Staying with the benchmark index, miner Anglo American got a downgrade to neutral from analysts at UBS while JPMorgan rates it underweight. The shares hung around the bottom of the index, down 30.5p to 1,826.5p.

But over on the mid-cap index there was better news. The FTSE 250 index managed an all-time high of 12,244.24.

Risers included Egyptian miner Centamin. Its shares lost more than 47 per cent on Thursday when it suspended operations but they recovered 25 per cent yesterday, gaining 6.94p to 34.64p as the threatened fuel supply to its gold mine was resumed.

Retailer Debenhams got a boost from analysts, including an upgrade from UBS' shop watchers who now rate it a buy because of "stronger sales" and the expected boost that Christmas will bring. They retain their share price target of 125p and the shares lifted 0.5p to 114.7p.


Moss Bros

Snap up shares in suit hire specialist Moss Bros, Peel Hunt's analysts insist. Moss Bros said trading in the second half was within forecasts and its gross margins are recovering. It reported strong demand for the hire of posh suits and its shares closed at 59.25p yesterday. It was its self-help plan of "product development, store refurbishment programme and online expansion" that encouraged Peel Hunt to raise their share price target to 74p.



Flog shares in HSBC, Liberum Capital's Cormac Leech urges. He thinks the "recent rally has been driven in part by unsustainably low loan losses in the third quarter" and rival Standard Charter is 10-12 per cent cheaper. He gave HSBC a share price target of 665p, while he rates Standard Chartered a buy at 1,700p. HSBC's shares ended 641.6p yesterday.



Hang on to shares in Apple supplier Volex. The small cap-electrical component supplier revealed its second profit warning in three months with full year profits now expected between $11m to $14m. Its shares ended down 36.5 per cent to 89p. But Investec's analysts rate it a hold because of its strong balance sheet and they think "earnings are recoverable over time". They downgraded their target to 125p.

Suggested Topics
Start your day with The Independent, sign up for daily news emails
election 2015The 10 best quotes of the campaign
A caravan being used as a polling station in Ford near Salisbury, during the 2010 election
election 2015The Independent's guide to get you through polling day
David Blunkett joins the Labour candidate for Redcar Anna Turley on a campaigning visit last month
voicesWhat I learnt from my years in government, by the former Home Secretary David Blunkett
ebooksA celebration of British elections
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Editor-in-chief - Financial Services - City, London

£60000 - £70000 per annum + benefits : Ashdown Group: A highly successful, glo...

Ashdown Group: Junior Application Support Analyst - Fluent German Speaker

£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

Guru Careers: Management Accountant

£27 - 35k + Bonus + Benefits: Guru Careers: A Management Accountant is needed ...

Guru Careers: Project Manager / Business Analyst

£40-50k + Benefits.: Guru Careers: A Project Manager / Business Analyst is nee...

Day In a Page

General Election 2015: ‘We will not sit down with Nicola Sturgeon’, says Ed Balls

'We will not sit down with Nicola Sturgeon'

In an exclusive interview, Ed Balls says he won't negotiate his first Budget with SNP MPs - even if Labour need their votes to secure its passage
VE Day 70th anniversary: How ordinary Britons celebrated the end of war in Europe

How ordinary Britons celebrated VE Day

Our perception of VE Day usually involves crowds of giddy Britons casting off the shackles of war with gay abandon. The truth was more nuanced
They came in with William Caxton's printing press, but typefaces still matter in the digital age

Typefaces still matter in the digital age

A new typeface once took years to create, now thousands are available at the click of a drop-down menu. So why do most of us still rely on the old classics, asks Meg Carter?
Discovery of 'missing link' between the two main life-forms on Earth could explain evolution of animals, say scientists

'Missing link' between Earth's two life-forms found

New microbial species tells us something about our dark past, say scientists
The Pan Am Experience is a 'flight' back to the 1970s that never takes off - at least, not literally

Pan Am Experience: A 'flight' back to the 70s

Tim Walker checks in and checks out a four-hour journey with a difference
Humans aren't alone in indulging in politics - it's everywhere in the animal world

Humans aren't alone in indulging in politics

Voting, mutual back-scratching, coups and charismatic leaders - it's everywhere in the animal world
Crisp sales are in decline - but this tasty trivia might tempt back the turncoats

Crisp sales are in decline

As a nation we're filling up on popcorn and pitta chips and forsaking their potato-based predecessors
Ronald McDonald the muse? Why Banksy, Ron English and Keith Coventry are lovin' Maccy D's

Ronald McDonald the muse

A new wave of artists is taking inspiration from the fast food chain
13 best picnic blankets

13 best picnic blankets

Dine al fresco without the grass stains and damp bottoms with something from our pick of picnic rugs
Barcelona 3 Bayern Munich 0 player ratings: Lionel Messi scores twice - but does he score highest in our ratings?

Barcelona vs Bayern Munich player ratings

Lionel Messi scores twice - but does he score highest in our ratings?
Martin Guptill: Explosive New Zealand batsman who sets the range for Kiwis' big guns

Explosive batsman who sets the range for Kiwis' big guns

Martin Guptill has smashed early runs for Derbyshire and tells Richard Edwards to expect more from the 'freakish' Brendon McCullum and his buoyant team during their tour of England
General Election 2015: Ed Miliband's unlikely journey from hapless geek to heart-throb

Miliband's unlikely journey from hapless geek to heart-throb

He was meant to be Labour's biggest handicap - but has become almost an asset
General Election 2015: A guide to the smaller parties, from the the National Health Action Party to the Church of the Militant Elvis Party

On the margins

From Militant Elvis to Women's Equality: a guide to the underdogs standing in the election
Amr Darrag: Ex-Muslim Brotherhood minister in exile still believes Egypt's military regime can be replaced with 'moderate' Islamic rule

'This is the battle of young Egypt for the future of our country'

Ex-Muslim Brotherhood minister Amr Darrag still believes the opposition can rid Egypt of its military regime and replace it with 'moderate' Islamic rule, he tells Robert Fisk
Why patients must rely less on doctors: Improving our own health is the 'blockbuster drug of the century'

Why patients must rely less on doctors

Improving our own health is the 'blockbuster drug of the century'