The Week Ahead: Nervousness ahead of Man Group update
Monday 22 March 2010
Nervous investors will be holding their breath ahead of a pre-close trading update from Man, the London hedge-fund group, this week, with some in the City highlighting a risk to assets under management (AuM).
Evolution, taking its cue from indications of a slow recovery for the hedge-fund industry, has lowered its March 2010 AuM forecast to $39.5bn (£26.3bn) ahead of the update, while Numis sees $40bn (£26.6bn), implying a decline of 6 per cent during the quarter owing in part to the weakness of the pound.
"We believe the market may be disappointed by the further fall in AuM during the fourth quarter and [by the] potential for further downgrades," Numis said last week. "Our revised 2011 earnings per share forecast of 27.4 cents is around 20 per cent below the consensus average and we see scope for consensus numbers to be lowered."
Evolution said Man was hampered by the general weakness of sentiment across the industry, pointing to the February fund-flow data from Eurekahedge, which showed $4.3bn (£2.9bn) in net inflows. Though better than January, when net industry inflows stood at $100m (£66.6m), the broker said improvement "remains slow", adding: "Inflows are only slowly returning to the industry as investors remain cautious. While Man may have restructured its investment platform, it cannot avoid this cautious sentiment."
The recent caution in the analyst community does, however, mean that the scope for a "nasty surprise" this week has been lessened, according to JP Morgan Cazenove. That said, an upside surprise is unlikely, the broker added, explaining: "Once again, consensus earnings estimates are under pressure, but there is still no reason to believe that estimates are being set at a level at which the company can necessarily outperform expectations."
Today Wolseley is due to issue interim figures this morning and the focus will be on the new chief executive, Ian Meakins, as he shares his views on the road ahead for the construction materials group. "This is the first real chance for the new chief executive as he outlines his strategy for the group going forward, both in terms of what he sees as the core activities and also how he plans to get the group back to a better level of profitability," Numis said, adding: "We believe that if management can put forward a sensible strategy and timeline for profit recovery, the shares offer significant upside from here."
Results/updates: AG Barr, Forth Ports, Zenergy, Wolseley.
Tomorrow Deutsche Bank expects $69m (£50m) in clean net income when the oil & gas producer Cairn Energy reports full-year numbers.
"As has been widely flagged by Cairn, no material Greenland update is expected, and sales are likely to continue to lag production capacity in Rajasthan," the broker said. "If this disappoints, we see weakness as a buying opportunity [ahead of] July, when Cairn spuds the first of four high-impact Greenland wells."
Results/updates: Ferrexpo, Imperial Tobacco, RAB Capital, Trafficmaster, Tribal, Legal & General, Cairn Energy.
Wednesday The house builder Bellway will post half-year numbers midweek, and UBS is eyeing £18.5m in pre-tax profits, with £21.5m in earnings before interest and tax. The cash position is forecast to stand at £61m, while the order book is likely to have seen some growth from the £390m seen at the end of January, the broker said, expecting the market to focus on factors such as the degree of land buying and the value obtained.
Also on Wednesday, Altium analysts are forecasting £8m in half-yearly adjusted pre-tax profits ahead of an update from RSM Tenon, the professional services firm. The broker expects the market to focus on the outlook for the year, with any news on the integration of RSM Bentley Jennison, which merged with RSM Tenon late last year, likely to drive sentiment around the shares.
Numis is also positive, saying: "We believe continued economic weakness will drive good growth from the Insolvency & Recovery division and the probability of a substantial tax changes after the election is also likely to be positive for the group."
Results/updates: Abbey Protection, Alliance Pharma, ICAP, J Sainsbury, Smiths Group, Soco, Hochschild, RSM Tenon, Bellway, Man.
Results/updates: London Stock Exchange, Next, Kingfisher, Premier Oil, Ted Baker, Evolution, PV Crystalox Solar, United Utilities.
Results/updates: Songbird Estates.
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