Market Report: Yell races ahead as broker eyes recovery

Hopes of economic recovery underpinned gains by the directories group Yell, whose share price strengthened yesterday despite a lacklustre day on the markets.

UBS said Yell's stock was set to draw steam from company's attempts to repair its finances last year. Yell has lagged behind its peers despite tackling debt levels that "threatened to wipe out equity holders", the broker explained. Its analysts argued that, with less volatile shares, a more comfortable financial position and the possibility of pent-up demand for the shares given that the refinancing took place so late last year, this underperformance should reverse in early 2010.

The coming months should also see Yell's revenues recover because, while trading remains tough, particularly in the US and Spain, closely correlated data tracking confidence among small businesses has been improving and should feed through to Yell's top line.

Though its longer-term forecasts remain conservative – UBS continues to assume structural declines in most of Yell's business – the broker raised its medium-term earnings estimates by more than 40 per cent.

The broker also switched its stance on Yell's shares to "buy", saying that the company's cyclical recovery was underestimated. The move helped the stock rally by 3.5 per cent, or 1.3p, to 38p despite weakness in the wider market.

Overall, the FTSE 100 fell 42.83 points to 5,455.37 and the mid-cap FTSE 250 index shed 29.83 points to close at 9,538.2. The losses were pinned on the expiry of various futures and options, and on a read-across from Wall Street, where the banking giant JP Morgan Chase issued results that beat profits forecasts but fell short of market expectations in terms of revenues. Equities in the UK and US were also knocked by the latest Reuters/University of Michigan consumer confidence index – a widely followed gauge of the mood among US consumers – which did not rise by as much as expected.

The index climbed to 72.7 for January, compared with a revised 72.5 reading for December. Economists had expected the gauge to rise beyond 73 this month.

On the Footsie, International Power stood out and advanced by 12.6p to 322p amid renewed speculation about the chances of a bid from France's GDF Suez. The rumours have done the rounds many times before and were heavy in December, with traders chatting about the possibility of a bid before the year was out. When nothing materialised, hopes faded at Christmas. Last night, traders remained cautious and cited the dubious record of rumours that surface on a Friday.

Elsewhere, the banking sector was unsettled as traders scrutinised the results from JP Morgan. HSBC, which was upgraded from "hold" to "buy" at Deutsche Bank, fell 12.1p to 702.5p and Standard Chartered lost 14.5p to close at 1551.5p. Also held back were Lloyds, which declined by 0.72p to 56.78p, and Barclays, which fell 7.45p to 311.2p. But Royal Bank of Scotland managed to remain positive, rising 0.74p to 36.74p.

In the wider financials sector, bid rumours continued to support the insurance group Aviva, which gained 5.1p and closed at 419.8p. Besides being mooted as a possible target for the tycoon Clive Cowdery's Resolution investment vehicle, Aviva's stock was also boosted by positive broker comment, with analysts at Execution initiating coverage with a "buy" stance.

"Management actions initiated in the second half of 2009 to restructure Aviva's business units should begin to bear fruit in 2010," the broker said. It added that, given the level of inefficiencies it had identified, it expected "at least a £200m upgrade to the current cost-savings programme".

On the downside, oil issues were unsettled, with Royal Dutch Shell ended 12p lower at 1848p and BG lost 5.5p to finish on 1216p as crude prices eased in response to the International Energy Agency's latest forecast for demand, which was largely unchanged despite expectations of an upward revision.

Miners, however, were worse off, with Kazakhmys falling 40p to 1410p, Xstrata declining by 31.5p to 1188.5p and Lonmin losing 46p to end on 1976p.

Further afield, the newspaper publisher Trinity Mirror fell 3.9p to 165p after UBS revised its stance on the stock from "buy" to "neutral" and cut its target price from 220p to 185p.

The broker said that, having been one of the media industry's star performers last year, Trinity now lacked catalysts for earnings upgrades or a re-rating. "We believe that as investors take risk off the table and turn to focus on solid, structural growth stories in the sector, Trinity Mirror is unlikely to fit the bill," UBS explained.

It also weighed in on Trinity's rival Johnston Press, which closed 0.5p weaker at 26.75p after UBS sounded a note of caution on the regional newspaper publisher's balance sheet.

"It remains unclear how the £85m debt repayment to avoid incurring higher interest rates will be funded, and equity issuance cannot be ruled out," the broker said, scaling back its target price to 27p.

"On the flip side, we believe 2010 could see Johnston's pension deficit, which currently represents about 40 per cent of the market capitalisation, decrease given rising gilt yields and hence falling liabilities."

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

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

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Sales Assistant / Buyer

£15000 - £17000 per annum: Recruitment Genius: This company offers a range of ...

Recruitment Genius: Customer Service Advisor

£15000 - £16000 per annum: Recruitment Genius: Customer Service Advisors are r...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45K: SThree: SThree were established in 1986....

Recruitment Genius: Compliance Manager

£40000 - £60000 per annum: Recruitment Genius: A Compliance Manager is require...

Day In a Page

Is this the future of flying: battery-powered planes made of plastic, and without flight decks?

Is this the future of flying?

Battery-powered planes made of plastic, and without flight decks
Isis are barbarians – but the Caliphate is a dream at the heart of all Muslim traditions

Isis are barbarians

but the Caliphate is an ancient Muslim ideal
The Brink's-Mat curse strikes again: three tons of stolen gold that brought only grief

Curse of Brink's Mat strikes again

Death of John 'Goldfinger' Palmer the latest killing related to 1983 heist
Greece debt crisis: 'The ministers talk to us about miracles' – why Greeks are cynical ahead of the bailout referendum

'The ministers talk to us about miracles'

Why Greeks are cynical ahead of the bailout referendum
Call of the wild: How science is learning to decode the way animals communicate

Call of the wild

How science is learning to decode the way animals communicate
Greece debt crisis: What happened to democracy when it’s a case of 'Vote Yes or else'?

'The economic collapse has happened. What is at risk now is democracy...'

If it doesn’t work in Europe, how is it supposed to work in India or the Middle East, asks Robert Fisk
The science of swearing: What lies behind the use of four-letter words?

The science of swearing

What lies behind the use of four-letter words?
The Real Stories of Migrant Britain: Clive fled from Zimbabwe - now it won't have him back

The Real Stories of Migrant Britain

Clive fled from Zimbabwe - now it won’t have him back
Africa on the menu: Three foodie friends want to popularise dishes from the continent

Africa on the menu

Three foodie friends want to popularise dishes from the hot new continent
Donna Karan is stepping down after 30 years - so who will fill the DKNY creator's boots?

Who will fill Donna Karan's boots?

The designer is stepping down as Chief Designer of DKNY after 30 years. Alexander Fury looks back at the career of 'America's Chanel'
10 best statement lightbulbs

10 best statement lightbulbs

Dare to bare with some out-of-the-ordinary illumination
Wimbledon 2015: Heather Watson - 'I had Serena's poster on my wall – now I'm playing her'

Heather Watson: 'I had Serena's poster on my wall – now I'm playing her'

Briton pumped up for dream meeting with world No 1
Wimbledon 2015: Nick Bollettieri - It's time for big John Isner to produce the goods to go with his thumping serve

Nick Bollettieri's Wimbledon Files

It's time for big John Isner to produce the goods to go with his thumping serve
Dustin Brown: Who is the tennis player who knocked Rafael Nadal out of Wimbeldon 2015?

Dustin Brown

Who is the German player that knocked Nadal out of Wimbeldon 2015?
Ashes 2015: Damien Martyn - 'England are fired up again, just like in 2005...'

Damien Martyn: 'England are fired up again, just like in 2005...'

Australian veteran of that Ashes series, believes the hosts' may become unstoppable if they win the first Test