Market Report: Traders love Eros after HBO Asia deal
Thursday 06 December 2012
Bollywood producer and distributor Eros International has just gone prime time.Its deal with HBO Asia, the pay TV group, is a "game changer" according to its house broker, Peel Hunt. The pair will launch two new premium, advertising-free movie channels, HBO Defined HBO Hits, in India.
The AIM-listed film studio which has box-office hits Rockstar and Desi Boyz under its belt, saw its shares dance up 9.5p to 243p yesterday on the news and Peel Hunt's Patrick Yau awarded it a buy recommendation with a revised share-price target of 352p.
The deal will see the development of HBO's existing formats for India as well as the creation of new content for the Indian television market and international distribution.
Mr Yau thinks the deal brings together content and "makes the channels a must-have for the digital pay-TV operators in India, both direct-to-home satellite and cable".
Eros had planned to list in the US earlier this year and delist from London, but it put the plan on hold during the summer blaming "US equity market conditions".
Over on the benchmark index, hopes of an improvement in the Chinese economy and renewed optimism of a deal to resolve the fiscal cliff in the US eased investor concerns and optimism swept the market during morning trade.
However, a cautious update from the European Central Bank meant that the positivity faded somewhat. The FTSE 100 index clung on to gains and just about stayed above the symbolic 5,900 mark during afternoon trade, to finish up 9.34 points at 5,901.42.
Engineers were out of favour and Weir Group worked up a 64p loss to 1,817p while engine maker Rolls-Royce's revelation that it is involved in a corruption investigation involving the Serious Fraud Office saw its shares dive 28.5p to 885p.
Investment broker Hargreaves Lansdowne declined 15p to 728.5p after analysts at Morgan Stanley cut their rating to equalweight – hold – from overweight.
Mining stocks were in favour due to investors feeling riskier on the back of better news out of China with Antofagasta topping the leaderboard, up 41p to 1,337p. It was also boosted by news that US rival Freeport McMoRan will diversify, making the copper miner more attractive to investors looking for pure mining investment stocks.
Traders took the opportunity of the focus on miners to spread vague gossip that mid-cap titanium miner Kenmare Resources could be the subject of a takeover bid. The Mozambique-focused miner's shares edged up 1.02p to 31.82p.
Back on the blue-chip index, analysts at Liberum Capital were drinking to the success of spirit group Diageo.
The broker's Pablo Zuanic said the Guinness-owner's taste for the clear, strong liquid has paid off and he toasts "improved vodka performance" – particularly the turnaround of Smirnoff. Mr Zuanic rated Diageo a buy with a share-price target of 2,300p.
Diageo has been busy stocking up its drinks cabinet ahead of Christmas and has bought Indian spirits group USL.
It is also in long-running talks to buy what it doesn't already own of tequila-maker Jose Cuervo. The group would also like to gain full control of Ketel One vodka, of which it already owns half.
Mr Zuanic said: "The impact from the USL deal in India, the upside from a potential deal for Cuervo, and longer term the potential to take control of Moët Hennessy, should also help continue to rerate the stock."
But Mr Zuanic's toast was not shared with the rest of the market and Diageo's shares stumbled down 5.5p to 1,854p.
Small-cap industrial services business Cape saw its shares sink by almost a third last month, after a profit warning and the departure of finance director Richard Bingham. Yesterday, energy expert Michael Speakman joined as chief financial officer and its shares ticked up 1.75p to 199.75p.
Over on AIM, Affero Mining said that it is in talks with "multiple parties" about investment or a potential takeover. The Cameroon-focused miner rose 9.4p to 75.9p.
The boss of leather goods maker Mulberry laid out his strategy to make the group even more upmarket than it already is, but the strategy has hit profits and margins in its half-year results.
Despite the declines, chief Bruno Guillon's strategy won over investors and the shares gained 20p to 1,171p having lost a fifth of their value after two profit warnings earlier this year. But the brand has a very small free float on AIM with the majority owned by Asian partner, the Ong family's Club 21.
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