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Tuesday, June 19, 2012

Tuesday's Stock Market Report from UK-Analyst: featuring Whitbread, Home Retail Group and i-design


From UK-Analyst.com: Tuesday 19th June 2012

The Markets

World leaders met at the G20 summit in Mexico on Tuesday, urging Europe to use all the artillery available to it to plough the continent of out its debt crisis. European Commission president Jose Manuel Barroso said the challenges arising from the crisis would be faced globally, not just by Europe. In the UK meanwhile, the Office for National Statistics unveiled that the nation's inflation rate had fallen to a 30-month low of 2.8% in May, down from 3% in April, which was unexpected among economists. Falling energy, food and commodity prices have all aided the decrease, with speculation now growing that the Bank of England will boost quantitative easing next month by 50 billion pounds and cut interest rates by a quarter of one percent.

At the London close the Dow Jones was up by 109.13 points at 12,850.95 and the Nasdaq was up by 27.19 points at 2,619.71.

In London the FTSE 100 rose by 95.22 points to 5,586.31; the FTSE 250 finished 149.49 points ahead at 10,870.93; the FTSE All-Share gained 47.60 points to 2,895.44; and the FTSE AIM Index climbed by 4.64 points to 679.16.

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Broker Notes

WH Ireland reiterated its "buy" recommendation for Park Group (PKG) with a 58p target price. The voucher and prepaid gift card company performed in-line with the broker's forecasts for the year ended 31st March, but with the addition of a larger than expected dividend of 2p, against a predicted 1.8p. WH Ireland believes that this could be a precedent for future dividends, leading it to raise its 2013 forecast by 10% to 2.2p. The broker also approved of the firm's transition from the consumer to the corporate market, increasing the number of business partners by 100, to 600. Shares in Park Group advanced by 1.25p to 45p.

Panmure Gordon maintained its "buy" rating for Dunelm Group (DNLM) with a target price of 600p. The broker said that the furnishing company continues to gain market share, leading it to increase is three year compound annual earnings growth rate from 11.5% to 12.6%. Panmure Gordon added that the firm plans to return 40 million pounds to shareholders in the autumn and noted that the shares are currently trading at a lower than traditional premium to Dunelm's peer group. The shares grew by 14.9p to 479.9p.

Canaccord Genuity retained its "buy" stance on Nanoco (NANO) with a 103p target price. The broker said that the quantum dot manufacturer's facility at Runcorn is set to begin production, with a short-term run rate of 25kg per annum, eventually scaling up to 40kg. Additionally, with large scale production becoming a realistic prospect, Canaccord believes that the firm could sign a commercial supply contract with one of its partners in the 2013 financial year. Nanoco shares slipped by 0.5p to 63.5p.

Blue-Chips

Hotel and restaurant group Whitbread (WTB) reported sales growth of 13.9%, year-on-year, for the 13 weeks ended 31st May, driven by 25.3% growth from its Costa Coffee chain. The company enjoyed strong international growth and plans to open 350 net new Costa stores and 1,000 Express units during the current financial year. The firm also noted 12.4% growth from its Premier Inn hotels, with the total number of nights sold up 11% to 3.3 million. Whitbread shares leapt by 118p to 1,967p.

Hammerson (HMSO) announced that it has sold the majority of its Brookfield Office Properties portfolio for 518 million pounds, 5% higher than its book value. Following the completion of the disposal, the property developer will have cash and unutilised facilities of 1 billion pounds. The group added that it will now focus primarily on retail properties, such as shopping centres and premium designer outlets. The shares rose by 10.3p to 428p.

Steel producer Evraz (EVR) held an investor day where it set a target of generating 5 billion dollars (3.2 billion pounds) of EBITDA by 2016, compared to the reported adjusted EBITDA of 2.9 billion dollars (1.8 billion pounds) for the year ended 31st December 2011. The group added that it plans to increase mining volumes by 120% in order to be entirely self-sufficient in the supply of iron ore and coking coal by 2016. In order to achieve this, the company plans to invest an average of 1.5 billion dollars (0.95 billion pounds) in development over the next four years. The shares jumped by 9.4p to 284.4p.

Mid-Caps

Shares in Home Retail Group (HOME) soared by 17.5p to 91.85p after it reported better than expected first quarter results for its Argos and Homebase businesses, reporting respective falls in like-for-like sales of 0.2% and 8.3% for the 13 weeks ended 2nd June. The company closed two Argos stores during the period, reducing the portfolio to 746, while noting increased demand for consumer electronics. However, broker Panmure Gordon reiterated its "sell" recommendation, maintaining that high fixed costs will result in Argos making a loss in 2014.

Imagination Technologies (IMG) reported pre-tax profit growth of 74% for the year ended 30th April to 28.5 million pounds, on revenue growth of 30% to 127.5 million pounds. However, the results were overshadowed by investor concern that its largest client, Apple, is facing growing competition in the smartphone market. Many have raised concern over the microchip developer's heavy reliance on iPhone and iPad sales, although the firm noted that it also supplies components for Apple's competitors such as Samsung. The shares tumbled by 28.9p to 456.9p.

Chemring Group (CHG) reported a 21% fall in underlying pre-tax profits to 39.2 million pounds for the six months ended 30th April 2012 as it suffered delays in orders from the US Department of Defense [sic], notably the 579 million dollar (370.3 million pound) NIITEK contract. The military countermeasures manufacturer noted a record order book of 1 billion pounds, adding that non-NATO customers accounted for 30% of revenues, compared to 24% in the first half of the 2011 financial year. Chemring shares sank by 29.9p to 293.5p.

Small Caps, AIM and PLUS

Adventis Group (ATG) was handed a lifeline on Tuesday as it announced that Lloyds TSB Bank, its sole lender, had sold the troubled advertising firm's bank debt to RCapital Partners LLP. RCapital is a specialist investment business providing growth and turnaround funding for UK and European businesses, providing investors with confidence that Adventis can avoid bankruptcy. Adventis shares surged 0.225p, or 81% to 0.5p.

ATM marketing company i-design Group (IDG) has signed a contract with First Data Corporation (FDC), a marketing software firm to collaborate FDC's targeted product marketing software package 'joono' with i-design's media sales services. Under the agreement, the group's total licensed ATM and self-service estate will increase from 21,500 to 28,000 devices, providing a significant boost in revenue streams for the company. i-design shares jumped 6.5p to 41p.

JSJS Designs (JSJS) was also in investors' good books as the home automation technology firm unveiled its first order from Screwfix, which will see JSJS's LightwaveRF products sold on the trade tool company's website. The contract, a reinforcement of the firm's 'successful track record' adds to a number of other deals signed with major retailers in the last nine months including B&Q, Maplin, and QVC. JSJS shares closed 0.05p ahead at 0.825p.

Teliti International (TEL) conceded the opening of its Malaysian data centre would be further delayed until the first quarter of 2013 thanks to delayed payments by the company's debt provider to its contractors. The firm had previously postponed the opening of the centre to July 2012 due to a delay in the delivery of key equipment, and this set back, which appears to be a completely unrelated matter, means Teliti's data centres will not generate any significant revenues in the year to September. The company's shares plummeted by 12.5p to 42p.

Irish zinc miner Connemara Mining Company (CON) pleased the market with news that it has adequate funds for all proposed expenditure over the next twelve months. Issuing results for the year to December the explorer said it had made further progress in the 'most prospective country in the world in which to find zinc' with the Stonepark discovery in Limerick increasing substantially in size. More recently Connemara signed a joint venture agreement on the Oldcastle block, which it believes will allow the full potential of the project to be reached. Connemara shares rose 0.75p to 11.5p.

Shares in Resources in Insurance Group* (RIIG) gained 0.05p to close at 0.475p on news of a deal with a 'leading financial institution' that will boost 2012 revenue by more than 750,000 pounds. The contract relates to the management of claims in connection with payment protection insurance and will provide a significant boost to the firm's three year fight to return to positive earnings territory. Simultaneously, the group announced its intention to broaden its services to the financial services profession through facilities for training, development and recruitment. The firm possesses the skills and potential customer base and is now engaged in exploratory talks with a company able to provide the administrative support with a view to possible collaboration.

* Resources in Insurance Group is a corporate client of Rivington Street Holdings, the ultimate owner of UK-Analyst.

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