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Monday, September 16, 2013

Monday's Stock Market Report from UK-Analyst: featuring Petrofac, Petra Diamonds and Nature Group


From UK-Analyst.com: Monday 16th September 2013

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The Markets

Markets on both sides of the Atlantic reacted positively to news that Larry Summers has pulled out of the race to be the new head of the US central bank. Summers - who has a reputation which is somewhat shrouded by comments made in 2005 suggesting that women have less ability in maths and science than men - was one of the favourites to succeed Ben Bernanke as head of the Federal Reserve. The FTSE 100 initially rose by around 0.8% on the back of the news as the new favourite to take over at the helm, Janet Yellen, is thought to be less likely to "taper" the US stimulus programme as quickly as Summers was expected to. Sam Tuck, a Currency Strategist at ANZ commented, "It had been perceived that if Summers had come into the Fed, he'd have been more likely to remove US policy accommodation quicker. Now that he's withdrawn his name there's speculation that policy accommodation withdrawal will take longer."

According to the latest survey conducted by the Confederation of British Industry, it appears that UK firms are pessimistic on the government's ability to deliver on its plan for a long-awaited pickup in infrastructure projects. Around two thirds of senior company executives surveyed believe that current government policies would have, at most, no impact on the execution of projects in areas such as road-building, expanding airports and new rail lines. The findings emerge after the government outlined a 100 billion pounds infrastructure investment plan back in June in response to opponents who demanded investment in infrastructure as a means of boosting the economy. John Cridland, Director General of the CBI, commented, "The faltering speed of delivery on infrastructure creates a worrying sense that politicians lack the political will to tackle some of the major issues head-on."

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At the London close the Dow Jones was up by 160.46 points at 15,536.52 and the Nasdaq was up by 5.71 points to 3,183.98.

In London the FTSE 100 was up by 39.06 points to 6,622.86 and the FTSE 250 increased by 71.94 points to 15,292.03. The FTSE All-Share was up by 20.21 points to 3,528.10 while the FTSE AIM Index grew by 8.22 points to 789.06.

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Broker Notes

Beaufort Securities stuck with its "buy" stance on pub operator JD Wetherspoon (JDW) after the company announced interim results on Friday. The broker notes that the booze seller gave a robust performance in the latest earnings data for six weeks ended 8th September, signalling an upbeat trend in the coming period. Moreover, Beaufort is encouraged with the expansionary plans of the company and feels that the firm's strong fundamentals are likely to pave the way for a smooth ride to its future growth. The shares slipped by 5p to 747p.

N+1 Singer stuck with its "buy" recommendation on diagnostic tool manufacturer EKF Diagnostics (EKF) with a target price of 35p. The broker notes that revenues were up by 17.7% to 14.9 million pounds over the first half of the year and was impressed with the organic nature of this. Overall, N+1 Singer remains attracted to the strong growth outlook and spread of products in structural growth markets, plus the optionality on EKF Molecular, which the broker insists could provide a further leg of growth and value creation. The shares grew by 2.25p to 28.5p.

Westhouse Research retained its "buy" recommendation on cement specialist Steppe Cement (STCM), increasing its target price from 42p to 46p. The broker feels that the company remains exposed to strong growth dynamics in the Kazakhstan cement market, in a trend which validates management's higher margin, lower volume business mix. On the whole, Westhouse argues that the potential for a recovery in margin and increased capital returns deserve a higher valuation rating. The shares were down by 0.25p at 37p.

Blue Chips

Oil and gas services provider Petrofac (PFC) announced that it has signed a $120 million (75.3 million pounds) agreement with Petronas for the operation and management of two high-specification training facilities as part of its training programme. The agreement - which provides capacity to train up to 500 staff - will run for an initial 5 year period and has an option to extend for a further 3 years. In response to the update, broker Numis retained its "add" recommendation and 1,350p target price on the shares, which rose by 9p to 1,399p.

Vedanta Resources (VED) has appointed ex-Rio Tinto Chief Executive Tom Albanese as chairman of subsidiary Vedanta Resources Holdings. Albanese left his position at Rio Tinto after the group revealed a $US14 billion (8.8 billion pounds) writedown almost entirely on the value of his two most significant acquisitions - the Alcan Aluminium Group and Mozambican Coal. The appointment comes after Vendeta has significantly streamlined its operations in an attempt to deal with its debt. The shares grew by 23p to 1,183p.

Mid Caps

Warehouse developer Segro (SGRO) has acquired a warehouse in east London for 30 million pounds, representing a net initial yield of 6.9%. Segro argues that East London is an area with strong potential for expansion given the on-going regeneration of the area and limited supply of good quality logistics warehousing. The acquired 25,500 sq m logistics warehouse was developed in 2004 and is located in Barking, East London, close to the A13 and A406. The shares ticked upwards by 6.5p to 310.9p.

Diamond specialist Petra Diamonds (PDL) posted a 27% increase in revenues to $402.7 million (252.6 million pounds) for the year ended 30th June, while net profit after tax came in at $27.9 million (17.5 million pounds), well up on the $2.1 million (1.32 million pounds) loss which was recorded in the previous year. The improved profitability came about as a result of a 21% uplift in production to 2,668,305 carats. The company went on to stress that industrial action at its mines has now ended and normal operations are expected to recommence at the affected mines from today. The shares fell by 3.4p to 117.4p.

Russian steel maker Evraz (EVR) agreed to sell its loss-making heat and power station located in Novokuznetsk to Optovaya Elektricheskaya Kompaniya for RUB10,000 (194.4 pounds) in cash. Tsentralnaya TETs generates and sells electricity and heat to Evraz ZSMK and provides heat to the city of Novokuznetsk. Evraz argued that the move is in line with its strategy of divesting "non-core and non-performing assets". The shares increased by 0.7p to 139.9p.

Small Caps

Diagnostic tool manufacturer Avacta Group (AVCT) has revealed that Dr Matt Johnson has joined Avacta to lead the group's Affimer technology development and production teams. Dr Johnson moves across from his position as head of R&D at Abcam, a provider of research antibodies. According to Avacta, Johnson de-risks the current development programme and should help to quickly deliver Affimer products to the market. The update comes after Numis re-iterated its "buy" recommendation and 1.4p target price on the company at the tail end of last month. The shares were up by 0.095p at 0.91p.

Online payments provider Optimal Payments (OPAY) booked a 50% increase in revenues to $118.4 million (74.3 million pounds) for the first half of 2013, propelling EBITDA up by 126% to $25.3 million (15.9 million pounds). The uplift in performance was boosted by its NETELLER e-wallet service, which saw its revenues almost double when compared to the first half of 2012. Geographically, the company was also quick to praise its efforts in Asia as its products benefit from increased traction in global markets. The shares surged by 26.75p to 256p.

Proton Power Systems (PPS), the industrial fuel cell specialist, boasted that it won a project worth 857,000 euros with Siemens AG, to be delivered over the next 10 months. The system in question will be used to secure a power supply for healthcare equipment in hospitals, with the first units expected to be shipped in September. The company went on to argue that the uninterruptible power supply market is growing worldwide and outlined its intention to expand its activities in this market segment. The shares swelled by 0.5p to 3.125p.

Education group AEC Education (AEC) saw revenues fall from 8.98 million pounds to 5.74 million pounds over the 6 months ended 30th June, while its loss before tax came down slightly to 0.56 million pounds. The group attributed the fall in revenues to deficiencies which emerged within its Singapore operations, which more than offset progress in London and Malaysia. These issues are apparently being addressed but the group conceded that its return to profitability will now be delayed. The shares remained flat at 3.375p.

Marine and offshore waste specialist Nature Group (NGR) declared that it has secured a contract from Interserve Defence Ltd, on behalf of the MoD, expected to begin in September 2013 and worth 2.13 million pounds. The contract - which will be delivered over a nine month period - is for carrying out additional civil works for a treatment facility on one of the overseas territories for the treatment of oil contaminated waste. The shares jumped by 1.5p to 37p.

Pharmaceutical player Allergy Therapeutics (AGY) announced that net profit after tax fell from 0.8 million pounds to 0.5 million pounds over the year ended 30th June, as revenues fell from 41.3 million pounds to 39.3 million pounds. The group partly blamed challenging market conditions in Europe for its plight but stressed that it is now genuinely confident on its prospects of penetrating its chosen markets in Germany. Investors reacted badly, sending the shares down by 1.25p to 9.375p.

International payments group Earthport (EPO) announced that online money transfer platform Amizo has now gone live with the Earthport service. According to Earthport, the new service will allow Amizo customers to send money faster, more securely, and at lower prices whilst giving Amino the opportunity to expand its offering and accelerate scaling. Equity Research house GECR today initiated coverage on Earthport with a "buy" recommendation and 51p target price. To download the report CLICK HERE.

* Earthport is a corporate client of GECR, a subsidiary of Rivington Street Holdings, the ultimate owner of UK-Analyst.

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