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Wednesday, September 19, 2012

Wednesday's Stock Market Report from UK-Analyst: featuring AMEC, Lonmin and Thor Mining


From UK-Analyst.com: Wednesday 19
th September 2012

The Markets

Minutes from the Bank of England's Monetary Policy Committee meeting suggested that the central bank is indeed considering the launch of a new round of quantitative easing. It is now strongly believed that the MPC will announce a 50 billion pound bond purchasing scheme during the fourth quarter of 2012. Meanwhile, the Bank of Japan has already followed in the footsteps of the Federal Reserve and European Central Bank, announcing a 10 trillion yen (78.8 billion pound) stimulus package, exceeding analysts expectations. The decision looks to have been a reaction to disappointing industrial output figures in July. Masaaki Shirakawa, the Bank's governor also downgraded economic forecasts for the country, blaming lower levels of exports on the struggling Eurozone countries.

At the London close the Dow Jones was up by 43.48 points at 13,608.12 and the Nasdaq was up by 3.28 points at 2,860.66.

In London the FTSE 100 rose by 20.32 points to 5,888.48; the FTSE 250 finished 40.49 points ahead at 11,974.19; the FTSE All-Share gained 10.35 points to 3,071.49; and the FTSE AIM Index climbed by 2.59 points to 715.56.

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Broker Notes

Panmure Gordon maintained its "buy" rating for Daily Mail & General Trust (DMGT) with a target price of 600p. The newspaper publisher is selling Evanta, one of its conference businesses, for a cash consideration of 58 million pounds, which the broker expects to be used to reduce debt. Panmure noted that the move follows on from the sale of the firm's stake in DMGRA and expects net debt to fall below 600 million pounds by the end of September. Shares in Daily Mail slipped by 1.75p to 485p.

Shore Capital reiterated its "buy" recommendation for Amlin (AML), impressed by the insure underwriter's diversified portfolio. The broker noted that the firm has protected itself against large catastrophe losses and believes that it will now focus on developing its presence in Europe. On the broker's forecasts, the shares trade on a 50% premium to net tangible asset value, falling to a 40% premium in 2013 and offer a prospective dividend yield of 6.1%. The shares edged down by 1.9p to 394.2p.

Seymour Pierce kept its "buy" stance for Asian Citrus (ACHL) with a 50p target price. The orange grower will release full year results on 21st September and the broker expects the firm to report revenue growth of 22% to 1.73 billion yuan (169 million pounds), as it benefits from a full year contribution from its fruit juice business BPG. Given strong cash balances, Seymour Pierce believes the group will issue a final dividend of at least 1p per share, giving a total yield of at least 4.5%. Shares in Asian Citrus jumped by 1.625p to 33p.

Blue-Chips

Smiths Group (SMIN) reported revenue growth of 7% for the year ended 31st July 2012, to 3.03 billion pounds, with adjusted pre-tax profits rising by 7% to 497 million pounds. The performance beat broker Investec's forecasts of revenues of 2.99 billion pounds and pre-tax profits of 486.7 million pounds. The engineering company saw sales rise across all its divisions despite facing in government spending cuts in the US and high levels of uncertainty in Europe. The shares advanced by 12p to 1,054p.

Engineering consultancy AMEC (AMEC) has agreed to buy a 50% stake in Brazilian oil and gas engineer Kromav Engenharia for a cash consideration of 12.5 million dollars (7.7 million pounds). The group hopes to utilise the target'[s brand recognition to develop its own presence in the country as part of it Vision 2015 goal of increasing earnings per share to 100p. Shares in AMEC inched down by 3p to 1,131p.

Mid-Caps

PZ Cussons (PZC) said that civil unrest in its main market of Nigeria has continued to impact performance, but noted that margins have improved as a result of lower raw material costs. Meanwhile, the personal care company's UK washing and bathing division delivered a robust performance in the period from 1st June to 18th September, with plans to launch a new range of limited edition Imperial Leather and Original Source products. The shares bubbled up by 10.8p to 318.1p.

Housebuilder Redrow (RDW) saw pre-tax profits surge by 70% to 43 million pounds for the year ended 30th June, with adjusted net asset value per share rising by 4.8% to 152p. The group completed 168 fewer homes than in 2011, at 2,458, but benefited from higher average selling prices of 204,100 pounds, from 174,100 pounds. The company also substantially reduced its net debt position, by 61.4 million pounds to 14 million pounds. Shares in Redrow swelled by 3.3p to 155p.

Lonmin (LMI) announced that it has reached a settlement with striking employees at its South African mining operations, who have agreed to return to work on Thursday 20th September. As part of the settlement, the platinum miner will issue a bonus of 2,000 rand (150.7 pounds) to each member of staff and increase the wages by between 11% and 22%. The shares crept up by 1.5p to 651.5p.

Small Caps, AIM and PLUS

PLUS-quoted mining focused investment vehicle Morano Resources (MRLP) has announced plans to delist. Having first floated on the market in June 2011, in order to raise additional funds, the firm has not had a single trade of its shares to date. The group rightly feels, therefore, that the costs of remaining listed are a rather large waste of money. In fairness to investors, the firm has not been very busy in the last year, with its only move being the purchase of an option to acquire Tajikistan focused gold miner Zarmadan Resources. The shares, unsurprisingly, stayed flat at 1.5p.

Shares in Europa Oil & Gas (EOG) soared by 4.875p to 10.375p after the firm announced that it has identified two sizable prospects, Mullen and Kiernan, in the South Porcupine Basin off the coast of Ireland. The deposits are located near an already proven deposit and cover areas of 120 and 244 square kilometres. The group added that it is in discussions with potential partners to form joint-ventures at both licences.

Amphion Innovations (AMP) reported a 58.8% year-on-year fall in revenues for the six months ended 30th June, to 1.1 million dollars (0.68 million pounds). The medical and technology business warned that it is in need of additional finance and is currently considering a range of options. In September 2012, the firm secured a 0.5 million dollar (0.3 million pound) loan from its Chairman James Macaleer and noted plans of cutting costs. The shares tumbled by 0.375p to 2.625p.

Recruitment agency The ReThink Group (RTG) achieved revenues of 44.1 million pounds for the six months ended 30th June, up 28.2% year-on-year, but pre-tax profits fell by 0.1 million pounds to 0.3 million pounds. The company invested significantly during the period, expanding the Berkley Pharmaceutical brand into the UK and launching its new Otravida search and selection brand. However, investors were concerned to hear that the firm has seen an "unexpected decline" in revenues since the start of the second half, as a number of placements were not completed. ReThink shares dropped by 1.875p to 7p.

Crimson Tide (TIDE) has launched a new version of its business software, mpro5, which is compatible with the iPad, iPhone and Android mobile platforms. The group said that it has already secured four contracts for the use of mpro5, with clients including commercial property group Knight Frank and Hampshire County Council. The firm added that the new capabilities of the software has enable to schedule a number of trials which will begin in the fourth quarter. The shares surged by 0.225p to 1.475p.

Thor Mining* (THR) confirmed that it has discovered improved grades and extensions to know gold deposits at the Spring Hill project in Northern Australia. The group drilled three holes at the Hong Kong zone and results included a 4 metre section with a concentration of 7.6 grams per tonne and a 2.7 metre section at 17.7 grams per tonne. The firm added tat this is part of a larger drilling programme across a number of targets that will be completed in 2012. The shares gained 0.05p to 1.1p.

* Thor Mining is a corporate client of Rivington Street Holdings, the ultimate owner of UK-Analyst.

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