Market Report: Success in retail not always a good thing

Next and WH Smith were victims of their own success as scribblers at Nomura downgraded the pair.

In an almost apologetic note that praised Next as “a best-in-class operator”, analysts at Nomura downgraded the retailer from buy to neutral, saying the skill of its management is increasingly reflected in its share price. Next lost 18p to 4,675p.

Nomura also took the red pen to WH Smith, cutting the high street chain to neutral from buy due to its “strong share performance”. Fraser Ramzan at the bank said: “Although we see the fundamental growth story as intact, we see few catalysts and, with the risk/reward more balanced, we move to neutral.” WH Smith dropped 0.5p to 758p.

The two were rare fallers as the benchmark index continued its booming run. The FTSE 100 closed at its highest level since 2000, adding 32.57 points to reach 6,755.63.

The benchmark index was helped higher by easyJet, which flew to the top of the index after good results from rival Ryanair and an upgrade from Numis. Analysts at the broker raised their earnings forecast for easyJet by 10 per cent and their target price from 1,210p to 1,330p, sending it climbing 47p to 1,235p.

Mike Trippitt at Numis also gave the banking sector a boost with his bullish position on Royal Bank of Scotland and HSBC. Mr Trippitt upgraded taxpayer-owned RBS from hold to buy, saying its US franchise Citizens Bank, which is to be spun off in two years, is being undervalued. RBS was among the day’s top risers, adding 15.1p to 351.9p.

The Numis analyst meanwhile raised his target price for HSBC to 750p, calling the bank “a core holding”. He reckons the bank’s restructuring has been “highly impressive” and is confident that further cost-cutting measures will be successful. HSBC was up 11.3p to 769.9p.

On the mid-cap index, the online grocer Ocado delivered for investors. After announcing a tie-up with Morrisons last week, Ocado received a further boost from Exane BNP Paribas, with analysts at the broker upping their target price from 225p to 300p. Ocado was the biggest riser on the FTSE 250, adding 11p to 285.1p.

SuperGroup, up 28.5p at 768p, was in fashion with traders after scribblers at Peel Hunt tipped the Superdry owner as a likely “turnaround” share.

Frankie & Benny’s owner Restaurant Group was another riser after Peel Hunt highlighted it as a star performer in the sector. Restaurant Group put on 18p to 531p.

The emerging market exhibition organiser ITE Group did well despite a fall in first-half profits. Analysts put the fall down to the lack of two key biennial events in Russia – printing exhibition Polygraphinter and woodworking machinery event Woodex – and noted that revenues since the beginning of the year are 12 per cent higher than the same period last year. Numis rated the company a buy and ITE Group put on 4.9p to 298.9p.

It was a different story for FirstGroup. The transport company plummeted more than 20 per cent on the news that it had tapped investors for £615m, axed its dividend and said goodbye to chairman Martin Gilbert. FirstGroup closed down 68.2p at 155.6p.

Precious metal miners were out of favour, with Randgold Resources and Fresnillo both among the biggest fallers. Despite announcing a $200m (£130m) credit deal with HSBC and three other banks, investors dumped Randgold, which fell 61p to 4,697.5p. Fresnillo dropped 35p to 1034.5p.

The troubled Kazakhstani miner Eurasian Natural Resources slumped 7.5p to 264.1p after news of an unwanted takeover bid by its oligarch owners and the Kazakhstan government leaked. Despite rival miner Kazakhmys being dragged into the lowball takeover bid, with the Kazakhstan government pledging its shares in the group as part of the offer, the mid-cap company made gains yesterday, adding 13.3p to 351.7p.

Without a new “horse-gate” scandal to boost is fortunes, the product-testing company Intertek also fell. Steve Woolf at Numis lowered full-year forecasts for the company, citing “cyclical weakness in minerals”. Mr Woolf retained a buy rating and said he remained “positive on the long-term structural growth and high returns model”, but investors were less sure and Intertek dropped 58p to 3,327p.

Buy

Mitie

After Mitie’s full-year results yesterday, Investec is advising punters to pile into the outsourcer. Andrew Gibb reiterates his “buy” advice and 310p price target, saying the company’s “discipline on working capital in what is a tough environment should... be applauded”. The shares, currently at roughly 269p, “fail to capture the underlying strength in the business”, says Mr Gibbs, adding “this could be the time to re-visit”.

Hold

Centamin

Don’t let go of Centamin, advises Canaccord Genuity. The broker has not budged from its “hold” recommendation following the gold digger’s results last week, saying the “key” to a re-rating will be a resolution to problems at it Sukari mine in Egypt, following the revoking of its lease. Canaccord has a target price of 38p for shares trading nearer 39p.

Sell

Mitchells & Butlers

Get rid of Mitchells & Butlers, says Panmure Gordon. The pubs group is announcing its first-half results on Thursday, with the resumption of its dividend unlikely, according to the analysts. Keeping a “sell” rating despite raising the target price to 310p, Panmure wonders whether the billionaire investor Joe Lewis will take some profits on his stake in the firm. Mr Lewis bought most of his shares at 130p, so with M&B currently at around 402p, he has got plenty to drink to.