Market Report: Thomas Cook travels in right direction
Tuesday 23 October 2012
It has flogged stakes in its Indian business, Spanish and Belgium hotels and some of its aircraft fleet. But analysts reckon its insurance business could be next on the block for leisure group Thomas Cook. A note from Exane BNP Paribas said the holiday group still owns some valuable assets, and highlighted its insurance division, White Horse, and its 6 per cent stake in Nats, the air traffic control service, as likely sale fodder. Exane thinks the assets could raise another £160m.
Exane upgraded the stock from underperform to neutral, with an increase in the target price to 25p from 15p. Analysts think its restructuring "is well on track", and the newly appointed management are due to "unveil further costs reduction and a long-term strategy on 28 November".
The note helped its shares to book gains of 1.75p to 21.25p. Exane did warn that the "mass-market tour operating industry remains fundamentally unattractive", and said the stock remains a risky call, but thinks the "risk/reward has become more attractive and some of our concerns are dissipating".
Exane's analysts are the latest to see a ray of sunlight from the tour operator. Last month Nomura upgraded its share price target.
BP's deal to sell its half of TNK-BP to Rosneft failed to help its shares. The deal will increase BP's 1.25 per cent stake in Rosneft to 19.75 per cent, but BP lost 6.95p to 443.45p.
The FTSE 100 failed to hang on to gains made mid-morning, and finished down 13.24 points to 5,882.91, but gold-miners were glistening as the price of gold hovered above $1,720 an ounce, recovering from last week's month low. Randgold Resources shone its way up to the top of the leaderboard, up 200p to 7,615p.
Joining the miners as risers, banks edged up as a better outlook for the eurozone encouraged investors toward riskier stocks. But Royal Bank of Scotland only managed a 0.5p gain to 281.5p as Investec's banking expert, Ian Gordon, downgraded its share price target to 255p and gave it a sell rating.
The wooden spoon went to the temporary power supplier Aggreko. It got covered in red pen from no less than five brokers who reduced their share price targets after last week's profit warning. HSBC downgraded the stock from neutral to underweight, with a target price slashed from 2,350p to 1,750p. But Jefferies' scribes claimed the third-quarter update was a "speed bump, not a slowdown", and retained their buy rating with a reduced target price for the shares of 2,535p. Its shares were down 64p to 2,073p.
Takeover talk is blustering around the wind turbine blades maker Morgan Crucible. City scribblers reckon the carbon and ceramics components maker is "vulnerable" after it issued a profit warning at its third-quarter results this month, and lookslike a takeover target.
Analysts at Jefferies said "there would appear to be interest in the sector", noting "US-based 'peer' Ceradyne was recently bid for by 3M". Jefferies also highlighted that the engineer has form: "in late 2006, the group was subject to an approach from an unnamed bidder". Despite the latest bid chatter, Jefferies scribes gave Morgan Cruicble a hold rating and a share price target of 260p, cut from 300p.
Its shares have lost more than 35 per cent in the past month as bad news from engineering sector peers hit investor sentiment, while its profit warning on 12 October sent the shares down further. Its shares lost another 0.9p to 239.6p, and it is at its lowest valuation relative to earnings for three years, according to Bloomberg.
Bid rumours resurfaced at the online fashion business Asos over the weekend. Reports that the US giant Amazon could be taking a look sent the shares up 73p to 2,510p ahead of its half-year results on Thursday. The group, which will welcome M&S's Kate Bostock in the new year to lead its product and trading team, is expected to reveal continued solid growth.
The retail guru Nick Bubb noted that with the market cap of Asos now around £2bn, "mighty Amazon has left it a bit late to start looking at the business … but whatever happens, the 27 per cent stake in Asos built up by the Danish fashion group Bestseller is looking cannier by the day."
OMG – no, not the popular and annoying exclamation Oh my God – we are talking about Aim-listed OMG (Oxford Metrics Group). The technology group shot up 5.9p to 30.1p after revealing a positive trading update.
FTSE 100 Risers
Fresnillo 1,916p (up 24p, 1.27 per cent) The price of gold recovered from its biggest one-day drop in more than three months last week and moved up to around $1,720 an ounce. The Mexican gold and silver miner was boosted by the move.
Lloyds Banking Group 40.81p (up 0.33p, 0.8 per cent) Along with miners, banking stocks beat the index and were propped up by positive signals from the eurozone.
FTSE 100 Fallers
Petrofac 1,578p (down 37p, 2.29 per cent) Scribes at Liberum Capital downgraded the oil services firm from "buy" to "hold". But they retained their share target price of 1,703p.
Johnson Matthey 2,280p (down 49p, 2.1 per cent) Citigroup analysts reduced their share price target for the chemicals group to 2,700p due to slowing car and truck markets, mainly in Europe, and lower recycling volumes.
FTSE 250 Risers
Homeserve 239.1p (up 8.1p, 3.51 per cent) Punters piled in to the emergency repair group that describes itself as the "the fifth emergency service". But investors are still awaiting the outcome of a Financial Service Authority inquiry.
Essar Energy 136.7p (up 4.5p, 3.4 per cent) Last week Morgan Stanley gave the power group a "buy" rating with a 170p share price target and its shares continued to gush up.
FTSE 250 Fallers
William Hill 347.9p (down 9.6p, 2.69 per cent) The bookie got a price target upgrade from Deutsche Bank to 390p from 350p, but it didn't save it from lingering around the bottom of the index.
Fidessa Group 1,341p (down 31p, 2.26 per cent) The supplier of trading systems to City brokers said sales for the full year will be flat, and it got a share price target reduction to 1,400p from Canaccord Genuity.
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