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From UK-Analyst.com: Monday 20th May 2013
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The Markets Amid increasing talk of a future EU referendum, UK business leaders have written to the government to argue that, although reform is needed, the economic case to stay in the EU is "overwhelming". The letter's signatories included the current and next Presidents of the Confederation of British Industry, the Chairmen of BT, Deloitte, Lloyds and Centrica, as well as Virgin Group boss Sir Richard Branson. The letter stressed that the UK's EU membership is estimated to be worth between 31 billion and 92 billion pounds per annum to the UK in income gains and accused those calling for the UK to leave the EU as "putting politics before economics". A section of the letter read "We should promote the cause of EU membership as well as defend our position. The benefits of membership overwhelmingly outweigh the costs" The Japanese government upgraded its outlook for the nation's economy, further supporting the aggressive stimulative measures which have been employed by Prime Minister Shinzo Abe. According to the cabinet office's monthly report, the world's third largest economy is "gradually recovering", an improvement on April's report which suggested that the economy was showing signs of recovery but was still subject to some weak spots. The upgrade comes as recently released Japanese data has suggested an upturn in exports and an increased level of factory output. Economics Minister Akira Amari commented "We are implementing fiscal and monetary policies under Abe's administration, and this has set the stage for a V-shaped recovery. Normally exports lead growth, but this time consumer spending is playing the leading role." Staying in Asia, Thailand's economy shrank by a seasonally adjusted 2.2% in the first three months of this year over the previous quarter, representing the nation's first economic contraction in over a year. The slowdown has been blamed on a stabilisation of output levels after a blistering year-long recovery from devastating floods in late 2011 that hit major factories north of the capital Bangkok and caused a double-digit drop in gross domestic product. Arkhom Termpittayapaisith, Secretary-General of the state planning agency hinted that government could cut interest rates as a means of combating this quarterly contraction and said "We are worried about the second quarter - if global economic uncertainties remain high and the baht continues to stay strong. The economy has shown signs of slowing down, so using interest rates should help." 
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At the London close the Dow Jones was up by 14.60 points at 15,369.00 and the Nasdaq grew by 1.43 points to 3,030.39. In London the FTSE 100 grew by 32.57 points to 6,755.63; the FTSE 250 finished 27.86 points higher at 14720.92; the FTSE All-Share was up by 15.67 points to 3,563.05; and the FTSE AIM Index grew by 0.52 points to 728.51.  Broker Notes Canaccord Genuity retained its "buy" recommendation on ITE Group (ITE) with a 317p target price. The broker feels that ITE is the dominant international exhibitions group in Russia and that it has also made significant progress in pushing into Asia over the past year, with acquisitions in Malaysia, India and Indonesia providing an additional platform for growth. Given this strong momentum in geographical expansion, Canaccord is upgrading its 2013 revenue and profit forecasts. The shares were up by 4.9p at 298.9p. Panmure Gordon stuck with its "sell" stance on retailer Mothercare (MTC) with a 280p target price. The broker continues to believe that Mothercare will struggle to break-even in the UK according to its own timetable, and that investors would be better placed investing in lower risk options such as Dunelm, Ted Baker, Thorntons or Majestic Wine. Furthermore, Panmure was encouraged by the fact that stores have recently been closed but remains cautious on the whether management has closed the "right" stores from a strategic perspective. The shares slid by 1.75p to 348p. Shore Capital stuck with its "buy" stance on supermarket Tesco (TSCO), impressed by the announcement of an extension of its international franchising activities. The broker is excited that Tesco is expanding the geographic reach of its F+F clothing business into Central Asia .Shore Capital acknowledged that these are tiny developments within the context of the whole of the Tesco group but, coupled with F&F's improving UK performance, the broker believes that this internationalisation potentially represents sound steps forward for the business. The shares increased by 2.3p to 383.1p. 
Blue-Chips Outsourcer Capita (CPI) has been named preferred bidder for Barnet Council's regulatory services contract, in a deal which is estimated to be worth around 154 million pounds to the firm over a 10 year period. Departments being outsourced to Capita include highways management, planning & development and regeneration & regulatory services, including environmental health & trading standards. Despite this seemingly good news, the update prompted broker Shore Capital to downgrade its "hold" recommendation to a "sell" stance, citing increasing margin risks as reason for its decision. The shares jumped by 3p to 949p.
Mid Caps Transport operator Firstgroup (FGP) posted a 36.5% fall in underlying pre-tax profits to 172.4 million pounds for the year ended 31st March in results which prompted Martin Gilbert to step down as the group's Chairman. The group attributed a drop in UK bus profits to a reduction in government support for the industry while lower profits generated from within the UK Rail arm were blamed on a new franchise extension period for First TransPennine Express. FirstGroup went on to announce a 615 million pounds fund-raising rights issue in a bid to reduce its heavy debt burden and confirmed that it has cancelled its final dividend this year after offering 16.5p for the previous year. The shares dived by 68.2p to 155.6p. Facilities management company Mitie Group (MTO) announced an 8.4% increase in group revenues to 2.12 billion pounds for the year ended 31st March, while underlying pre-tax profits grew by 5.4% to 111.1 million pounds. However, after costs relating to the exit of its mechanical and electrical engineering contracting businesses as well as restructuring and acquisition costs, statutory profit before tax actually dropped by 37.8% to 58.8 million pounds. Looking ahead, the group's immediate priority is achieving organic growth in its primary outsourcing markets in the UK but the group did hint that it could consider "selective acquisitions". The shares fell by 6p to 267.4p. Pork products provider Cranswick (CWK) revealed an 8% increase in adjusted pre-tax profits to 49.3 million pounds for the year ended 31st March, while revenues were up by 7% at 875 million pounds. The group cited increased underlying demand for pork in the UK consistent with population growth, as well as the beneficial impact of the recent horsemeat scandal as reasons for the improvement. The update prompted broker N+1 Singer to maintain its "buy" recommendation on the group with a 1,109p target price. The shares gained 28p, finishing the day at a tasty 1,115p. Small Caps Agrochemical group Eden Research (EDEN) confirmed that the three active substances that are used in the company's lead product, 3AEY, have been approved for use in plant protection products by the European Commission. According to Eden, this is the "key regulatory milestone" for the business and allows the actives to be used with its encapsulation technology to create a range of agrochemical products for a variety of applications. The shares soared by 4.875p to 13.625p. LED lighting specialist LPA Group (LPA) has been awarded exclusive preferred bidder status by Hitachi for the supply of lighting for the Inter City Express Programme, which will see new trains supplied to run on the Great West Line and Great North East Line in the UK. The contract is expected to be worth around 3 million pounds to LPA Group with work scheduled to begin by the end of this year. The shares were up by 6p at 74p. Chemicals specialist Haike Chemical (HAIK) saw revenues grow by 49.7% to 1.3 billion pounds in 2012 but still recorded a loss of 31.8 million pounds, swinging from a 6.86 million pounds pre-tax profit in 2011. The performance of Haike's refinery business was pivotal in this reduction in profits, with the division suffering from reduced margins and lower utilisation rates, while Haike's specialty chemicals business was also adversely impacted by "sluggish market conditions" and average annual price falls of 9.8%. The shares were down by 2.75p at 19.25p. 
Gold miner Vatukoula Gold Mines (VGM) has entered into a subscription agreement with SCD Energy, a subsidiary of DRK Energy, under which SCD will receive 30,000,000 new ordinary shares in the company at a price of 15p per share - a 140% premium to Friday's closing price of 6.25p. The subscription shares will represent approximately 19.2% of the enlarged issued share capital of the company and will raise 4.5 million pounds for Vatukoula. The funds raised from the subscription agreement will be used for working capital purposes while VGM works to secure the debt financing. The shares rocketed by 4.625p to 10.875p. Payments facilitator Earthport (EPO) confirmed that its first fully automated payment service in Morocco is now live as it targets further expansion into the North African region. Earthport said that the decision to enter the Moroccan market came in response to the growing demand for low-cost payments in the region, with Morocco being the second largest remittance country in North Africa with an estimated $6.4 billion (4.2 billion pounds) worth of payments received in 2010. The shares inched up by 0.125p to 19.75p. Advanced Power Components (APC) posted pre-tax profits of 47,000 pounds for the year ended 28th February, up from 19,000 pounds in the previous year, boosted by healthy returns from investments made in the cleantech sector. The group conceded that its traditional electronic components market "continues be affected by the general weakness in the UK economy" but stressed that this weakness was more than offset by the aforementioned growth of investments in the cleantech sector, particularly the growth of Minimise Limited which APC has increased its equity holding in to 51%. The shares fell by 1p to 32.25p. | 
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