Blue Index - UK Market and Share Analysis

Barclays Harvest
March 27th, 2009

A clear sign this morning that the worst of the banking crisis may be over. Throughout the crisis, Barclays (BARC) has been adamant that it has sufficient capital and reserves in place to cover its obligations. This morning it was announced the bank had passed an all important FSA stress test, designed to judge whether or not the bank needs more capital

On top of this Credit Suisse have upped their target price to 170p from 110p due to the imminent £4bn cash injection from the sale of the its iShares business. Once this money comes in, Barclays has a few days until the end of March to decide if it wants to join the government’s toxic asset protection scheme. But now the FSA have given the green light, it means Barclays can decide whether or not to join on its own terms rather than be forced into the scheme in the same way as Lloyds (LLOY) and RBS (RBS).

Given this solvent position and the strong results announced earlier this month, Barclays still looks very cheap in spite of the near doubling in price over the past few sessions. So I’m picking some more up, (incidentally at around the same level at which the Mid-East money bought in late last year). A short term target price of 168p and then onwards and upwards looks the order of the day

Blue Index :|
 
Punch Up
March 30th, 2009

After avoiding the pub sector like the plague in the last year, (cheap supermarket beer = people drink at home in a recession), some of the battered market players are now starting to look heavily oversold

This is no better illustrated than in the case of Punch Taverns (PUB), where shares have plummeted 91% in the last year. Last week, the group sold six of its prime managed freehold pubs in central London to rival Fuller Smith & Turner (FSTA) for 20 per cent below market price. Broker KBC Peel Hunt confirms the sale was at knock-down prices, although it is understood the six pubs were not put on the market but were sold after Fuller’s made an approach for them, (yeah right). However, following the disposals Citigroup has this morning upgraded Punch to buy from sell, and it says the shares could rally if further disposals are announced.

Given the 91% fall in the shares over the last year, barring disasters it is difficult to envisage any further downside, so I will sip a cautious pint or two, and go long for a few weeks with a short-term target price of 53p. If the shares make it to 53p and hold, and if further disposals are made this could be a nice little recovery play. Bottoms Up!

Blue Index :|
 
Sparks at Marks
March 31st, 2009

I stand by my recent comments in regard to the core food retailers Tesco (TSCO) and Sainsbury (SBRY) and fashion retailer Next (NXT). In spite of this, Next shares are forging ahead, which speaks volumes for the brand, management and strategy. Perhaps though, the update today from flagship retailer Marks & Spencer (MKS) was always going to be the most telling litmus paper for the fortunes of the High Street

And it’s very encouraging to find out that Marks have grown total Q4 group sales by 1.9%, a significant improvement on Q3 and much better than consensus expectations. As expected the numbers were a mixed bag, with a 4.2% fall in like-for-like fell sales 4.2%, while online sales rose by 20% and international sales by a whopping 23%. Chairman Sir Stuart Rose who has come under fire recently for being too controlling, said M&S customers are responding positively to the actions taken, and he is hopeful the overall fiscal Q4 sales trend, showing better than expected sales, will continue in 2009. Mr Rose also expects UK retail gross margin to be ‘down around 175 basis points versus last year’, and says trading conditions on the High Street ‘haven’t got any worse, but it certainly haven’t got any better’. Considering the abject doom-mongering, death and destruction forecast by certain retail pundits, the increase in sales is actually very good and shows as many of us already believe that conditions and climate may have bottomed out and are on the turn

I certainly think so. I’m already a holder of M&S, but the statement this morning is enough to persuade me that more retail therapy is in order. The shares have jumped already today, but I’ve dipped in again, and see upside through to at least 313p in the short term

Blue Index :|
 
Speedy Higher
April 1st, 2009

Here’s an opportunity to pick up a fallen star. Speedy Hire (SDY) shares have plummeted from over 800p a year ago to just 126p this morning

Today the group announced to the market that it expected annual adjusted pre-tax profits to meet market estimates at the lower end of the GBP33-38m range. The group are also on track achieve total annual projected cost savings of GBP42m, and said in spite of the tough business environment, it has continued to secure significant new business wins. On top of this, Speedy said it has also revised a GBP300m pounds loan facility, with more suitable covenants appropriate for current market conditions and the trading outlook over the term of the facility.

Shares have already jumped up to 158p, but with the economy possibly bottoming out, and trade set to improve or at least maintain current levels, in my book it looks as though the shares have overshot to the downside, and even after this morning’s jump they still look good value at 158p. So I expect Speedy to go higher, up to 161p and beyond, and I’ll be hiring some shares myself for the ride

Blue Index :|
 
Sour Times at Sugar firm
April 2nd, 2009

A bit of a shocker from sugar giant Tate & Lyle (TATE) this morning. Just 2 months after issuing a profit warning in January, the group issue a further warning this morning

Although management stated that annual pre-tax profits will be marginally below previous guidance on 28th January, for a firm of this size to have to change guidance so soon afterwards smacks of incompetence, and some might say that heads should roll as a result

T&L said on 28th Jan that full-year profits would be at the lower end of market expectations at around GBP244m. The group have also been hit by prospects of cheap generic imports of its blockbuster product Sucralose, which makes up 21% of group profits while only accounting for 4% of sales. But CEO Iain Ferguson insisted the group were actively managing cost base and maximising cashflow, and added the group remained a well-financed business and he was confident in the groups ability to deliver positive cash flows.

Fine words indeed, but lets not forget that broker Citigroup recently downgraded its target price for the sugar group, before todays statement. I reckon there are problems yet to surface at the group, and I for one see a shorting opportunity down to 232p

Blue Index :|
 
GlaxoSmithKline Bid for Shire
April 3rd, 2009

GlaxoSmithKline (GSK) has always been perceived as a fine, dependable defensive play for investors, seemingly barely noticing the Credit Crunch. For traders going long and short, the stock is perhaps a little less predictable, trading as it does within a fairly tight range

Of late the shares have traded at the lower end of the range, although that now seems set to change for a number of reasons. Broker Cazenove this morning upgraded shares to outperform from in-line, and says Glaxo offers an attractive risk profile and valuation. It says the recent underperformance is due to a number of ‘top down factors, such as perceived risk it will pursue a big M&A transaction and that newsflow from the late-stage R&D pipeline is relatively lacklustre this year’. Cazenove reckons those concerns are overdone, and says the expanded cost savings program will be sufficient to shore up near-to-medium term earnings, and there are a number of assets entering phase III data trials this year which could drive long term growth.

But this weeks tie up with Shire Pharmaceuticals (SHP) to help market the hyperactivity drug Vyvanse in the USA is intriguing, given that in such a competitive industry, it is rare indeed for a sector giant and mid-cap player to enter such a commercial arrangement. A bull will say this agreement is merely a precursor to a full blown bid for Shire by Glaxo, in which case, given Glaxo’s highly impressive history of acquisitions, you can bet it will be highly earnings and value enhancing

I am already a holder, but these developments in my book provide clear upside for Glaxo in the short and medium term. A long play then, with a short term price target of 1166p, and on from there. That’s the right prescription in my book!

Blue Index :|
 
Shorting Fertiliser
April 6th, 2009

Investing in exciting and dynamic companies is all part of the trading addiction in my book. So agricultural and engineering group Carrs Milling (CRM) would probably come right at the bottom of the list in that regard. But when viewed as a trading instrument, with some fairly compelling fundamentals, things start to look a little more interesting. Particularly given the dire state of the UK economy.

Carrs today announced a slight rise in interim pre-tax profits to £5.3m from £5.2m, on revenues up 8% to £174.5m, but warned that its full year pre-tax profits will be lower than last year due to the market becoming more difficult in terms of both volumes and prices, particularly as regards fertilisers, where it now expects a ’substantial adverse variance to budget for the full year’. The interim dividend is unchanged at 6p. While the shares are just off the year lows, they have recovered slightly in the run up to the results, although the sector looks set to remain under pressure for some time to come.

Indeed after the announcement today, the shares fell 10%, so in my view there is a shorting opportunity here, probably down as far as 370p. But if fertiliser prices stabilise or start to fall, watch for a recovery and close your position

Blue Index :|
 
Get This Party Started
April 7th, 2009

I must confess, the idea of investing into gaming groups hasn’t ever really caught my imagination. The relative boom and bust within the industry over the past few years certainly made a billionaire or two, but there has been a considerable amount of consolidation due to shrinking markets, plus the spectre of legal action by the US Govt against companies offering services to residents have all served to weigh on the markets

So news this morning that Partygaming (PRTY), (the third largest sector player by market cap), has reached agreement with US authorities that will protect it from prosecution over providing internet gambling services to customers in the region, is in my book good reason to get the party started. The group has agreed to pay $105m to the US Govt, in semi-annual instalments over a period ending on 30 September 2012, and expects to report a related charge of $100m when it reports its interim results.

There was also news of a fall in quarterly group revenues, down to $100.1m for the three months ending 31 March compared, from $128.9m last time. This was due to significant strengthening of the US dollar and competitive pressures, but CEO Jim Ryan said now that the group have successfully resolved discussions with the US authorities, they are actively reviewing consolidation opportunities that, if concluded successfully, are expected to provide new and additional sources of growth.

Clearly the successful resolution and agreement with the US authorities removes the single major overhang weighing on the stock and any uncertainty over future revenues. Shares opened ahead today, with a 10% surge in the share price at the open. While the price has recovered somewhat, at 246p it is still a long way short of the 1600-1700p levels of a few years ago, so with the uncertaintly removed, the shares look to be a screaming buy. At the very least I’m long to 270p over the next few weeks

Blue Index :|
 
Hello BlueIndex,

Nice posts. And looks like good timing on some of the stocks. How do you choose those particular ones. Are you using screeners?

What do you think about Yell?

thanks,

TT
 
Sporting Highs
April 8th, 2009

I’ve been most impressed with sports retailer JD Sports this year. In spite of the doom and gloom predictions, there are a few well-run quality retail plays out there and JD Sports is certainly on of them. The shares at 359p have nearly doubled since January, and of course the group recently snapped up some 10% of it’s near insolvent rival JJB Sport.

This morning the group announced that sales had progressed 0.3% since January, and for the last financial year the group unveiled a whopping 24% hike in annual pre-tax pre-exceptional profits at GBP53.6m. The results came in ahead of expectations, and JD no doubt pleased investors with a 41% hike in the dividend to 12p.

The shares have had a great run this year, nearly doubling since January, and while there is doubtless scope for further progress, I for one feel this stellar run for the shares will have to pause for breath at some point. After the news this morning, the shares jumped again, although they are retracing now. To my mind they’ve done well, but they are high enough for now, and it’s high time for a pause for breath and consolidation before further progress. I am shorting the shares to 315p, but I do stress this is a short term play, and no reflection on the quality of the business

Blue Index :|
 
Hi ttabz. In my opinion YELL shares should be far higher than they are now. The business has a lot of debt, although the group recently re-negotiated banking facilities, GBP4.3bn is a lot of debt. I believe Goldman Sachs has a 35p target, but if the UK economy starts to firm at some point, I expect this to be a strong recovery play

Blue Index :|
 
Can I also get you opinion on Minerva. i have done my research and i think they are going to follow what TW.L havd done recently what is your view
 
Mining Recovery Candidate
April 9th, 2009

It has been a mixed picture for the miners in recent weeks, but today India-focused group Vedanta Resources (VED) has delivered some credibility to the stock market recovery argument. Aluminium and zinc production hit a record level for Q4, prompting broker Liberum Capital to suggest the company is extremely undervalued.

From a technical standpoint, the shares have delivered multiple support points below the 600p level since last year’s November low under 400p. There is a 10-day moving average at 740p, and if they remain above this level, the stock could reach the top of a rising November trend channel, pointing toward 1,000p. There are clear golden crosses (where a short-term moving average breaks above a long-term moving average or resistance level) displayed between the near term moving averages, which also underpin a very solid technical picture

This solid technical base in place on the daily chart, targets up to 1,000p in the near term. Shares have shot up 13% so far today, with the market seemingly concurring with Liberum sentiment, so 1,000p now looks well within reach. I’m in! :)
 
BlueIndex said:
Hi ttabz. In my opinion YELL shares should be far higher than they are now. The business has a lot of debt, although the group recently re-negotiated banking facilities, GBP4.3bn is a lot of debt. I believe Goldman Sachs has a 35p target, but if the UK economy starts to firm at some point, I expect this to be a strong recovery play

Blue Index :|
Click to expand...

Thanks BlueIndex,

Already bought at 12p and stupidly sold it at 19p (Limit order while I was away last week). And bought back at a higher price. Since then I did average down and now holding it till my target price.

What would you recommend to read about exit points? I am trading just shares with no leverage.

Thanks,

TT
 
Software Upgrade
April 14th, 2009

It’s true to say the software sector has displayed some remarkably resilient characteristics throughout the credit crunch. While sector stars such as Autonomy (AU.) have defied not only gravity but also some of the gloomier analyst notes, others, such as financial software group Misys (MSY) are currently at 6-month highs and enjoying strong broker support

Today broker UBS has upped Misys price target to 129p from 118p, and while it retains a neutral rating, the broker says last week’s interim management statement shows license orders and sales actually exceeded it’s expectations. Although UBS inserts a caveat, and says investors should not be complacent due to the challenging environment and the potential for project cancellations in banking, the market has taken this as a good sign, pushing the stock to 6-month highs.

On a technical level, it looks to me as though a weekly close above 130p suggests that pre September resistance at 180p is attainable, particularly in light of the 50-day moving average rebound seen in the past week at 118p. Shares have rocketed to 140p already this morning, so I’m in for a ride to 180p

Blue Index :|
 
BG is VG
April 15th, 2009

Oil and gas giant BG Group (BG.) has always been a perennial favourite of mine, offering a vast cross section of oil resources and continual new finds dotted around the globe

Today the group announced a new oil find in the Santos Basin, offshore Brazil, taking the number of discoveries in the BM-S-9 concession to three. There are some interesting technical features on the chart which also help to underscore the good news. The share price has rebounded from a support level around 1000p, close to which runs a 50-day moving average line through 1,030p. While the share price remains above this on an end of day close basis, there is potential upside all the way to the top of an ascending March price channel at 1,200p.

It’s also worth remembering that oil & gas plays have underperformed the market in recent weeks, and given the current market sentiment the major plays can be expected to recover lost ground. Shares rocketed up in early trading today and returned back to 1037p, again above the 50-day moving average line, so I’m hopping in for another upward run tomorrow

Blue Index :|
 
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