Blue Index - UK Market and Share Analysis

[BlueIndex]

Ashtead Vulnerable
May 11th, 2009

The signs are there that things may be bottoming out for the housing market and in particular housebuilders. Plant hire group Ashtead (AHT) has fared well in recent weeks, as the fortunes of its business depends heavily on the strength of the construction sector.

But this morning the group warned the markets that it expects underlying full year pre-tax profits to 30 April 2009 to be within the lower end of current forecasts. Added to this the group said recent rental rate and revenue trends suggests that profits in fiscal 2009-2010 are also likely to fall below the board’s earlier expectations. Although rental volume continue to hold up well, and in line with expectations, as expected, construction markets in the UK and US are weaker with private sector projects particularly impacted by the shortage of funding. The Ashtead board alo said it had “reduced net debt by GBP100m to GBP1.04bn”, and it remains “highly confident in its strength” for the longer term.

In a fragile and recovering construction marketplace, Ashtead shares have recovered well in recent months. The news today will be seen as a setback, and while the prognosis is brighter for the longer term, the shares currently look vulnerable. I see short term selling opportunity here, with a short term target price of 49p, although watch for housing data announcements, as any improvement here will almost certainly impact on the shares

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[BlueIndex]

Checking Out
12th May 2009

Never having been a huge fan of hotel stocks, (for no rational reason I hasten to ad), I see an opportunity to go short of hotel operator International Hotels (IHG) today

The hotel operator unveiled a sharp fall in Q1 operating profits which fell to USD69m from USD124m last year. The numbers excluded liquidated damages, although the group are targeting cost savings of USD70m this year and expect to complete the USD1bn relaunch of Holiday Inn by the end of 2010. CEO Andrew Cosslett said the year had been “very challenging for the industry” and while occupancy rates were showing signs of stabilization during the quarter, room rates, which held up well during 2008, “declined under the pressure of a very competitive market”. Added to this a key industry metric called RevPAR (Revenue per available room), fell 13.6% in the first quarter of 2009, compared with a 6.5% fall in the previous three months.

It is clear the hotel industry is enduring a tough period, and although International are working hard to implement cost savings, the shares have already risen some 44% since the start of March. Taking this, and the challenging outlook into account, I think these shares are currently overvalued, and in spite of the rise in early trading. I am a seller, with a 480p target price

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[BlueIndex]

Rip Roaring Compass
May 13th, 2009

Hats off to British catering group Compass (CPG); this morning the group announced their best-ever set of interim figures

Interim profits to March 31st, soared 40% to GBP405m from GBP289m last time, while EBIT, EBIT margins and free cashflow shot up 33% to GBP240m, on sales up 24% to GBP6.93bn. Although group operating profits received a GBP78m boost from the weak pound and acquisitions, CEO Richard Cousins said the first half was nonetheless a positive performance “against the backdrop of deteriorating economic conditions. He added the “trends in revenue seen in the first half of the year are expected to continue into the second half”, and looking forward the “acceleration in the rate of cost efficiencies should enable us to deliver further progress in the second half of the year”

This consummate set of numbers from Compass this morning clearly illustrates the strength, resilience and growth potential of this business. And when you consider the shares have are down just 7% from a year ago, having endured the greatest financial crisis since WWII, it makes the story here all the more impressive. With growth set to continue into an improving economic backdrop, I see the shares as a strong buy, with a short term target of 375p and then beyond to 400p plus

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[BlueIndex]

BT Group and the Global Services Millstone
May 14th, 2009

The mauling of BT Group (BT.A) on fundamentals continues unabated after the UK fixed line telecommunications group announced further impairment charges from its disastrous Global Services division of GBP280m for Q4, along with an increase in the pension deficit to GBP2.9bn.

BT this morning reported overall Q4 losses of GBP977m against profits of GBP426m last time, although revenues rose 1% to GBP5.5bn, while EBITDA fell 14% to GBP1.35bn. However the group reported better-than-expected performances for BT Retail, where EBITDA rose 11% to GBP435m compared to consensus at GBP420m, and Openreach, where EBITDA rose 3% to GBP512m against a consensus of GBP496m.

Several analysts have made positive noises over the numbers; Societe Generale said free cash flow, EBITDA and the pension deficit were all ahead of consensus, while another analyst said results were mixed, with good cash outflow and dividend commentary but weak revenues. I really can’t see how BT are going to improve anytime soon though. While some may view the results as a mixed bag, and the pension deficit is an issue that should improve as the markets recover, the Global Services division as an ongoing disaster, and until the unit is sold off or becomes profitable, there is little scope for a strong recovery in the share price. I see the shares returning to pre-recent rally levels, and have a short term target price of 80p

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[BlueIndex]

Don’t bet on Ladbrokes
May 15th, 2009

Shares in bookmaker Ladbrokes (LAD) were looking like a good recovery play up to this morning, having regained over 50% of their value after the October low of 133p last year

But this morning, Ladbrokes reported a 34% slump in profits for the first four months of 2009. Profits from big spending high rollers tumbled to just GBP25m from GBP40m in 2008, with punters enjoying a particularly good Cheltenham Festival in March. These abnormal gross win margin levels, increased free bets and unfavourable cost phasing in eGaming against the previous year resulted in the profits slump, although CEO Chris Bell was at pains to point out the rate of decline “is not representative of our expectations for the year”, and he said the decline “has already given way to more normal trends in May”. And overall, added Chris Bell, the general resilience of the business and strong cost controls “gives us confidence in the outturn for the full year”.

But brokers Noble, Shore Capital and Daniel Stewart all see the results as “disappointing” and “weaker than expected”, particularly given that results at rival William Hill are strong and in “stark contrast”

While it’s probably fair to say the trend of exceptional gross wins is unlikely to continue, particularly given the strong track record, until there is further evidence of a sustained return to “normal trends”, this negative trading update will continue to weigh on the stock. I see a selling opportunity to below 200p, around 198p to start with. But watch for the next trading statement, as the shares could recover ground very quickly if trading returns to normal levels

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[BlueIndex]

All-MITIE
May 18th, 2009

Further evidence emerged today of how companies are outsourcing to save money. Building services group MITIE Group (MTO) reported a 12 percent hike in annual pre-tax profits to GBP75.9m, on revenues ahead 8.2 percent to GBP1.5bn. Additionally, MITIE’s forward order book increased to GBP4.9bn from GBP4.4bn last time, and the group are benefiting from a “sustained level of outsourcing” as contracts become larger and longer term. Looking forward, the company also said it is ‘extremely well positioned” for acquisitions and buying up companies which fit the existing business.

Analysts are very positive over the results, remarking the results are “strong”, with “high visibility and positive outlook” resulting from MITIE clients increasing outsourcing to improve efficiency and to cut costs. If like me you have tracked the share price performance of companies providing outsourcing during the downturn, such as Compass Group (CPG) and Capita (CPI), you’ll find that almost without exception, these companies are very positive in outlook, with clear revenue visibilities. MITIE fits firmly into this category, and with such a strong all round performance, I can see further upside for the shares. After some early profit taking today, the shares are on their way back up, and I am in, with a short term target price of 240p

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[BlueIndex]

Marks & Spencer shorting opportunity
May 19th, 2009

In contrast to my Sparks at Marks blog on 31st March ( see Sparks at Marks | Blue Index CFD Blog ) I think a short term opportunity now exists to sell M&S shares for the next few weeks, possibly months.

The flagship retailer reported a 40 percent slump in adjusted pre-tax pre-exceptional profits to GBP604.4m, down from GBP1.01bn last time, on revenues up slightly to GBP9.06bn, driven by a 26 percent jump in international sales. However, UK sales from stores open at least 1 year fell 5.9 percent as customers cut spending or sought out less expensive goods. Marks also slashed the dividend by 33 percent to 9.5 pence a share, from 14.2 pence a year earlier, to conserve cash. Its total dividend for the financial year will be 15 pence, down from 22.5 pence. M&S said trading in the first seven weeks of the new fiscal year was “broadly inline with the positive trends of Q4″, but it remains “cautious about the outlook for the remainder of the year”. Broker Pali International said that in spite! of the hype in the statement about “speeding up change”, overall the results look “a bit underwhelming”, and accordingly Pali have a sell rating and 265p target.

While there are signs that the worst may be over for the High Street, the fact remains that M&S has to deal with falling UK sales, and it remains to be seen if the new “2020 Doing the Right Thing” initiative will recover the lost market share, regardless of the growth in international sales. The shares have enjoyed a strong recovery run so far this year, but until M&S can demonstrate a recovery in UK market share and restore the dividend, a selling opportunity exists to short down to 250p. As a holder I can win both ways with this little exercise

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[BlueIndex]

Not so mellow Yellow
May 20th, 2009

Having some knowledge of the directory industry, like many I thought the precipitous share price drop at Yell (YELL) was overdone, and particularly at the 12p or so it sank to, it looked an absolute no brainer bargain. Many other investors clearly thought so too, and the share price has recovered dramatically this year

But today perhaps provided an insight into the underlying problems still faced by the group, after the Yellow Pages publisher announced annual pre-tax losses of GBP1bn down from a profit of GBP310m last time, on revenues up to GBP2.4bn from GBP2.2bn last time. The losses came as a result of impairments at its operations in South America and Spain and restructuring charges, but the group also expects to revenue to fall 11 percent in the first quarter of the new year, and for EBITDA to fall 20 percent. As a results of the ongoing economic uncertainty, Yell said it will provide guidance one quarter ahead during the fiscal year 2010. After the numbers an analyst said that while the results are in line, the Q1 guidance looks poor, and for no news to be provided on the debt position is a negative

Sure the results are in-line, but after the huge rally of recent weeks, the uncertain outlook, coupled more importantly with a lack of guidance over the debt position is surely a sell signal. Until the business can demonstrate the debt is under control, the uncertainty will weigh on the shares. I am a seller down to 35p on that basis

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[BlueIndex]

Upside Stateside for Balfour Beatty
May 21st, 2009

Along with nearly everything else, construction firms have taken a hammering during the Credit Crunch, with axed contracts, delays and in some cases non-payment.

UK engineering and construction group Balfour Beatty (BBY) have proved to be a rather remarkable exception to the rule, and this morning the group announced its US building business has won several contracts worth a total of up to USD560m. Balfour Beatty has been selected as part of a joint venture to manage the construction of a USD1.2bn hospital in Dallas, Texas, to work as construction manager for the new USD80mn Perot Museum of Nature and Science in Dallas, and in Kansas the US Army Corps of Engineers have selected Balfour Beatty to provide pre-construction and construction work for a replacement hospital at Fort Riley, with an option for further construction services which is expected to be given in September.

This clearly illustrates Balfour Beatty’s recession-proof qualities as it develops a portfolio of Government related work. And news yesterday that the group have reached financial close on a GBP6.25bn contract for the M25 further reinforces the buy argument. I can see significant upside in the near term in a recovering market, so I am long on the shares with a 30-day price target of 404p

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[BlueIndex]

British Airways and the Perfect Storm
May 22nd, 2009

On April 27th I wrote about British Airways (BAY) weakness, see British Airways Weakness as regards the swine flu outbreak, but I suggested watching out for a sharp rebound in the event of positive news.

Shares did recover somewhat, but today that positive news seems a long way off, after the flagship carrier scrapped its dividend and reported a GBP358m full year net loss, against a GBP712m profit last time. Although revenues did improve by 2.7% to GBP8.76bn, BA was hit by last summer’s high fuel prices and a slump in passenger and cargo volumes, while net debt nearly doubled to GBP2.4bn against GBP1.3bn last time. CEO Willie Walsh said today the current conditions were the “harshest we have ever faced”, and added that “with no immediate improvement visible, market conditions remain challenging”. BA will cut further costs going forward, and merger talks with Spain’s Iberia, which have been going for almost a year, will still take several months to conclude.

Today’s numbers really are a comprehensive tale of woe, with almost every metric eligible for intensive care as BA heads deep into the perfect storm. Worryingly, BA’s net debt position is soaring, and while the merger with Iberia should bring some stability and economies of scale, there is little else to look forward to in the near term. The shares still remain strong sell, with an immediate short term target of 145p, and probably lower until there are signs of improvement

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[BlueIndex]

Aveva Turnaround
May 26th, 2009

With a few notable exceptions such as Autonomy (AU.), IT firms have been hit as hard as any during the credit crunch, as companies cutback all but the most essential expenditure

But another shining example emerged this morning of an IT company coping well with the downturn. Engineering software group Aveva (AVV) reported a 32% hike in annual pre-tax profits to GBP59m, on sales up 29% to GBP164m thanks to strong growth in the Asia Pacific and Central, Eastern and Southern European regions. The IT group also upped the final dividend by 30 percent to 6.5p per share taking the full-year dividend to 9.36 pence a share from 6.65 pence a share. Although some projects are now being postponed or cancelled due to the current economic slowdown, Aveva said it had already commenced restructuring to ensure it would be in a stronger position for trading in a difficult environment.

When you consider that Aveva shares have fallen by over 65 percent since the highs of summer 2008, the trading position seems somewhat at odds with the share price fall. The shares have recovered slowly since March to close at 579p last Friday, and now with a significant improvement in trading and outlook, plus a restructuring plan already in place, Aveva looks very well positioned to benefit from any upturn. I see some real upside potential in the short term and beyond, and accordingly have a long position, with a stop at 525p and short term target of 650p

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[BlueIndex]

Solid Silver Service
May 27th, 2009

It’s no secret that miners have for the most part enjoyed a strong recovery in 2009. Silver miner Fresnillo (FRES) in particular has produced one of those terrific top right hand corner charts that look so good in annual reports and presentations

For the time being at least that looks set to continue, after Fresnillo reported a strong start to 2009, with silver production up 9% on last year and stable gold production. Chairman Alberto Baillères said the company’s costs were declining in US dollar terms compared to last year, due to a higher exchange rate, lower input costs and the company’s ongoing cost control programme. He added he expected that “ongoing operational efficiencies at our mines will result in a slightly higher level of silver and gold production than that achieved in 2008″, and reiterated the “fundamentals of Fresnillo are strong”.

While the mining sector has enjoyed a good run in 2009, I am also not a little impressed by Fresnillo’s highly experienced management team, that have collectively been through numerous similar cycles before. Although the shares have enjoyed a strong and consistent run in the year to date, with an eye to improving gold and silver prices I see further upside for Fresnillo. A long play, stopping out at 650p, with a short term 30-day target of 750p looks to be the order of the day

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[kingrabbit]

has blue index still got a licence to trade i just had an e-mail from them saying i needed to contact IG directly

 

[Ann Elk]

blue index

Yeh, I had an email too, it says
'Earlier today the FSA varied the regulatory permissions of Blue Index Limited ('BIL'), preventing BIL from conducting any regulated activities until further notice.'

Can't say I'm surprised. I opened an account with them but thankfully read some posts on here which made me cautious, then soon discovered their pushy salesmen, large commissions and lack of transparency (they didn't put all their losing trades on the history in their website), without making any trades.
A lucky escape.

I'm still looking for an advisory service that does work, I know I know I should do it myself but whatever you lot say, it is hard!

 

[Captain Haddock]

has blue index still got a licence to trade i just had an e-mail from them saying i needed to contact IG directly

Blue Index punished in FSA probe
FT.com / Companies / Financial Services - Blue Index punished in FSA probe

 

[tafita]

Let this be a lesson to those who can't be a*sed to do their own research.

Blue Index, would you care to comment?