Blue Index - UK Market and Share Analysis

[BlueIndex]

Nothing Temporary About Aggreko
April 16th, 2009

Temporary power group Aggreko (AGK) have always had a fairly resilient business model and as such have been a popular target for defensive minded investors, but today’s ahead-of-expectations Q1 results came as a very pleasant surprise

Aggreko (AGK) reported a 42% rise in Q1 revenues, boosted by its international division, and also forecast that full-year trading will be at similar levels to 2008, on a constant currency basis. Even better, the group pointed out that if the sterling - USD rate stays at current levels, reported results will however show substantial growth over 2008. Although group net debt at the end of Q1 increased by GBP94m to GBP327m million, with total facilities of GBP568m and GBP195m of refinancing & replacement of facilities recently completed, the group has ample headroom to finance its needs.

Analyst consensus opinion says the results are ‘better-than-expected’ and the interim statement is ’strong’. This is a highly rated company, and the strong interim performance and forecast puts the shares into the ‘compelling long play’ category. I am a buyer here, with a short term target price of 575p

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[BlueIndex]

Enough Morgan Crucible
April 17th, 2009

On the face of it, industrial materials group Morgan Crucible (MGCR) has been staging a gradual recovery from year lows of 48p. Shares pushed ahead again this morning, even after the group warned of falling orders and a challenging year ahead.

The Chairman Tim Stevenson reported a 9% fall in organic revenues from this time last year, but he pointed out that this was to a degree offset by an 11% hike in Q1 revenues, bolstered by acquisitions and favourable currency movement. Plans to refinance its banking facilities are progressing well, but the group is ready to cut further costs if necessary, after slashing its headcount by 10% (or 1,000 people) since last summer.

While the shares have recovered a fair bit of ground, and enjoyed a good run up to this announcement, with the uncertainty ahead the shares at 114p are high enough for now. In early trading today the share price popped up to 122p, but have gradually returned back to earth. I see some consolidation going forward, and rate these a short term short, with a target of 99p

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[BlueIndex]

Creston Recovery Play
April 20th, 2009

Buying shares in any sort of marketing and advertising firm is an activity that in my book should be for bull markets only, (and the earlier in the bull market cycle the better)

It seems we might get lucky with marketing firm Creston (CRE). The group said this morning that it expects to outperform market expectations for revenue growth and has slashed net debt by over £12m to around £19m as at 31 March. Creston has recently switched focus to digital and direct marketing rather than conventional advertising, ( a wise decision in my book). The group performance was ahead of expectations as regards consensus forecasts for revenue (achieving 4% year-on-year growth), EBIT, EBITDA and earnings per share. Plus net new business wins for the year will generate over £15m in revenue compared with £9m the year before, and it has a healthy pipeline of new business, especially in digital and on-line research.

With an increasing number of economic experts calling the end of the recession, Creston is very firmly in the ‘well-placed recovery play’ category. I am a buyer here, with a short term target price of 58p

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[BlueIndex]

No Credit Crunch in Tescoland
April 21st, 2009

As we all now seem to a greater or lesser extent to be living in Tescoland, perhaps one should take the view that if you can’t beat ‘em, join ‘em! With large and small outlets on every corner, and now rapidly building into a global entity, Tesco (TSCO) has in many ways left its peers foundering in its wake

And today, deep into the credit crunch, the supermarket giant unveiled better-than-expected annual core pre-tax profits of GBP3.13bn, a record for a UK retailer. Although the group net debt of GBP9.6bn is higher than expected, the position has been exaggerated by forex and is offset by the nebulous list of freeholds valued at GBP30.4bn. Tesco is positive on overall outlook for the year, and has also upped the divi for happy Tescoland holders.

Shortly after the results came out this morning, a few brokers posted their views. Numis is reviewing its 420p target price and retains a buy rating, and broker Pali also has it’s 375p price target under review, with a neutral rating. In some ways the results are a mixed bag, but the sheer momentum and spread of risk makes holding the shares a no brainer, and buying now for some upside very tempting indeed. I am now in Tescoland too, with a short term target price of 367p

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[BlueIndex]

Game For Growth
April 22nd, 2009

What an outstanding set of numbers this morning from niche retail gaming retailer Game Group (GMG). The retailer probably represent something of an anomaly, given that Credit Crunch trading logic would suggest avoiding all but core retailers like the plague

But shares rocketed 12% this morning after the group announced a 67% hike in annual pre-tax, pre-exceptional profits to GBP126.2m, on turnover up 32% to GBP1.97bn. The results are slightly better-than-expected, and in my book a miracle given the operating climate! Game also confirmed current trading is ahead of expectations with a strong increase in gross margins, and says it continues to be ‘very cash generative’ with a ’strong balance sheet’. And as a sign of confidence going forward, it has increased the final dividend by 25% to 3.71p. Brokers are largely positive, with Altium upgrading from buy to hold on valuation, while Singer Capital have cautioned over a tough fiscal year ahead, with ‘tough comparatives and competition.

But frankly, Game Group have an outstanding record of delivering results and growth in tough markets. The shares are a firm buy in my book, and although they are already up to 183p, I reckon the next few days will see the shares move ahead again after the analysts have pored over the numbers. I see a short term target price of 195p, with 200p plus to follow

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[BlueIndex]

Persimmon and on
April 23rd, 2009

A sure sign today that the UK housing market is at least firming up and finding a bottom. We still have one helluva long way to go though, and while Darling’s budget yesterday seems to have been universally slated, there were a few items to help stimulate the housing market:

* Stamp duty holiday extended until the end of 2009
* Mortgage Interest Scheme extended by six months
* Introduce mortgage security backed guarantee to help banks lend
* Invest £80 million to shared ownership HomeBuy scheme
* Reduce restraints on new contruction to help meeting demand for housing
* £500 million of support for house building firms to deliver 1,000s of new homes, including £100 million for ‘green housing’
* £50 million to modernise homes for people in the armed forces

On the face of it, that provides plenty of stimulus and support for Persimmon (PSN), the UK’s second-largest house builder by market cap. Persimmon updated on trading, saying Q1 volumes continued ahead of expectations, and said while the recent improvement in market conditions is encouraging, it remains cautious about the outlook until mortgage availability improves further and employment prospects become less uncertain. The group said it currently has ‘6,500 homes reserved, contracted or legally completed with total sales revenue of about GBP960m’, and added its position in the market ‘will provide a strong platform for growth when the market improves’. The trading update covers the 16 weeks since the start of the year.

With the budgetary support for the housing market yesterday, Persimmon is well placed for a slowly improving market. Although the shares have outperformed other housing stocks with a 72% rise since the start of the year, I am a buyer for further upside, with a short term target price of 435p

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[BlueIndex]

Ultra High Enough
April 24th, 2009

Traders and investors seeking a defence and aerospace share with fine defensive qualities in more ways than one, one could do a lot worse than Ultra Electronics (ULE). The company designs, manufactures and supports electronic and electromechanical systems, sub-systems and products for defence, security and aerospace applications around the world

This morning the group reported trading for the year to date was in line with expectations, and said its broad portfolio and spread of specialist market positions were underpinning group performance. Ultra has a forward order book of GBP800m and says it has its ‘customary level of visibility’ looking forward, plus the board are confident of continued good progress in 2009. The group have also benefitted from the current exchange rates for US and Canadian dollars against sterling, and if these are sustained, they will benefit group results compared to 2008 through a favourable currency translation effect.

Ultra has also reviewed its level of hedging cover for the next two years and reduced it to match the expected net inflow of US dollars, which has incurred one-off costs of around £12m net of tax. This is certainly a safe place to put your money for the longer term, but with the shares enjoying a good run up to the announcement, on a short term basis they are high enough for now, and I see a short sell opportunity down to 1100p

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[BlueIndex]

British Airways Weakness
April 27th, 2009

The prospect of falling victim to a further mutation of Avian Flu, namely Swine Flu sounds horrifc and conjurs up all sorts of nightmare imagery

However you feel about potentially profiting from this sort of crisis, British Airways (BAY) is potenially looking weak after negative press and pundit commentary over air travel. Blue Oar Securities Mark Brumby says, ‘Without scare-mongering, it is worth pointing out the current outbreak of swine flu, which is centered on Mexico but which has spread to the US, is unlikely to do much to encourage travel. He adds ‘In recent years the SARS and avian flu scares have depressed travel volumes materially’. British Airways operates four flights a week to Mexico City, said this morning it is ‘operating as normal’.

But BA shares fell in early trading, and are displaying short term weakness. Currently at 151p as I write, there looks to be a further selling opportunity to 140p, but I expect a sharp rebound when the crisis is bought under control, so be prepared to take profits

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[BlueIndex]

Oil Price Millstone
April 28th, 2009

BP (BP.) is a great British company, that has evolved into a global leviathan. It is the biggest brand in the UK oil and gas sector, and has historically looked after it’s shareholders well, with generous dividends and a reputation as a solid performer

Recently of course, the global crisis has seen the price of Crude plummet from over $150 per barrel at it’s peak last year to below $40 per barrel. Falling demand and falling prices has presented the oil giants with a number of challenges, such as improving efficiency and cutting costs. This morning BP (BP.) reported a 58.6% fall in adjusted Q1 net profits, on revenues down 46.7% to USD48.09bn from USD90.15bn in 2008. The oil price fall has done the damage. But, the group clean replacement cost net profit, (taking out inventory gains/losses and exceptional items), totaled USD2.58bn, against USD6.24bn for Q1 2008, which came in above analysts’ expectations of USD2.23bn. Overall the numbers comfortably beat consensus, due to continuing improved performance in exploration, production, refining and marketing and progress on cost cutting, and BP has upped the dividend by 3.5% to 14 cents per share.

So BP is a company doing everything it can to combat falling demand and prices. That’s great news, but while its numbers clearly show an increase in production, I see the low oil price continuing to weigh on BP shares regardless of improving performance. Shares are ahead slightly this morning, but until we see an improvement in prices and demand, I expect profit taking and ongoing share price weakness. There is a short term sell opportunity here with a target price of 449p. Any improvement in demand and the price of Crude will impact immediately, so be ready to close your position!

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[BlueIndex]

Chemical Brother
April 29th, 2009

Chemical group Croda (CRDA) is one of those less-than-glamorous companies, often ignored as traders and investors chase more adventurous plays. But a closer look at the Croda share price performance shows a resilient performance throughout the credit crinch, and a healthy dividend to boot

This morning, Croda announced Q1 pre-tax profits for continuing operations of GBP21.7m, on revenues from continuing operations up 1.9% to £230.8m. These numbers are also boosted 20.1% thanks to some favourable currency transactions, and more importantly are in line with expectations. Group net debt at £395.8m at the end of March, is also in line. While the group expects weakness in the commodity and industrial markets to continue, Croda anticipates sales growth in its Consumer Care and this, says the group, allied to ongoing cost savings and favourable raw material pricing in some sectors, gives continued confidence for further progress in 2009.

This is a solid set of numbers in a Credit Crunch, particularly when compared to group peers, and it is encouraging to see that net debt is under control and that cost cuttings are having an impact. I see a short term buy opportunity in Croda, and am going long on the shares with a limit of 597p

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[BlueIndex]

Sky Is The Limit
April 30th, 2009

Well done BSkyB (BSY). To pick up 80,000 new subscribers when the markets were expecting around 55,000 is a great result. Added to which the group are operating in a Credit Crunch, and are up against Free View services around the country, which makes the achievement all the more impressive

BSkyB also hiked nine month adjusted operating profits by 13% to GBP589m, while revenues rose 7% to GBP3.96bn and were driven by demand for the high definition TV offering. The group expect the rest of 2009 to “remain challenging”, while the group will stay focused on “cost efficiency” and will invest for long term value into areas such as high definition TV.

Even though the group are cautious looking forward, these numbers and the results are a pretty impressive performance for the Credit Crunch. BSkyB shares shot up nearly 5% to 486p today, there is still plenty more upside to come, particularly now various Government ministers are saying the worst of the recession is over. I’m in for a punt up to 521p

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[BlueIndex]

Prudent Management at Informa
May 1st, 2009

That’s a clever move by the management at Informa (INF). The group have this morning announced a fully underwritten 2 for 5 Rights Issue to raise net proceeds of approximately GBP242m.

Even though Informa have “comfortable headroom” with their current facilities, the board took a decision to go for a rights issue in view of “an economic environment that shows no signs of improvement”. CEO Peter Rigby said cost savings of GBP30m had already been saved from the final dividend, but added the Board are “very intent on retaining value for Shareholders” and had decided on a rights issue as renegotiation of the Group’s covenants at the present point in time would “result in a significant incremental expense versus the current pricing, incur material one-off fees, increase leverage and likely provide limited additional covenant headroom”.

The decision has been a huge success, not only was the rights issue fully underwritten, but on getting it away this morning, shares have rocketed over 12% to 334p. This is a great vote of confidence for the management, not only has the move secured Informa’s finances for an uncertain market, but it also makes the group an attractive bid target. There is still further upside on the shares in my view, if you’re a holder already you’ll be delighted, if not then buy with a short term target of 364p

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[BlueIndex]

Hot in the City
May 5th, 2009

We really do seem to be back in bull market mode, and with a sea of blue across trading screens, picking a stock for sustainable growth presents a similar challenge to picking out winners in a falling market

But here is a strong technology play for your perusal. Data centre operator Telecity Group (TCY) has invested in and built data centres throughout Europe, with all development funded from its cash flows and existing borrowing facilities. The group today reported a 36% hike in annual revenues to GBP133m, and said trading in the first three months of 2009 was strong, with revenue growth in line with last year. Telecity confirmed its financial position remains robust, and its previously announced expansion plans are “progressing well”. Several analysts were very positive, saying the results and numbers are “very good and better than expected”, adding the company was clearly “outperforming the market”. Deutsche Bank also added its weight behind the stock, lifting its target price to 300p from 280p and maintaining its buy rating.

With such universal support, and such a solid performance in a tough market, even after the 8% jump in the share price this morning, the stock still offers impressive upside and growth potential. This is almost a no brainer, and I am a buyer, with an initial short term target price of 320p

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[BlueIndex]

Lighting Up Time
May 6th, 2009

I’m not an avid smoker myself, although I am partial to the odd cigar or two. What is remarkable though, is that despite the longstanding threat of litigation and the prospect of being sued for vast, balance sheet breaking sums, the tobacco companies go from strength to strength

This morning British American Tobacco (BATS), said it expects another year of good earnings growth, with no falloff in volumes in its first quarter despite tougher trading conditions. Purveyors of many leading tobacco brands, BATS reports strong revenue growth in constant currency terms, due to good pricing, with all regions contributing, and the group result also benefited from favourable currency movements. The group’s four “Global Drive” Brands achieved overall volume growth of 7%, with Dunhill up 8%, Kent up 3%, Lucky Strike up 4% and Pall Mall up by 11%, while volume growth came from last year’s acquisitions of Skandinavisk Tobakskompagni and Tekel. CEO Paul Adams said the group have been “encouraged by the good start to the year”, and added “the first quarter’s trading demonstrates the strength of British American Tobacco’s business, despite the difficult economic conditions”.

This stock really is a strong play for all seasons, on the one hand seemingly immune to the Credit Crunch, and on the other a strong play for global market recovery. I’m in for a punt here, and I’m working on a 30 day target price of 1700p

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[tafita]

Bat

May I ask where you have set your stop loss, mental or otherwise?

Thanks

 

[BlueIndex]

Barclays Harvest II
May 7th, 2009

Astonishingly, shares in Barclays (BARC) have nearly doubled since my last blog post some 6 weeks ago. While this is fantastic news for relieved shareholders, I have spoken to many traders and pundits with bruised and battered legs, who have been kicking themselves for not jumping on the Barclays recovery story any earlier. And with reports of huge demand for Barclays shares, the management team were under not inconsiderable pressure to deliver results.

They have

This morning Barclays announced a 12% surge in Q1 net profits to GBP736m, on revenues up 42% to GBP8.15bn. Pre-tax profits from Barclays Capital, the investment banking arm, shot up to GBP1.05bn, nearly triple the GBP365m. CEO John Varley said the acquisition and successful integration of the Lehman business had resulted in a ‘transformational change in Barclays Capital”. He added that trading had been generally “consistent with the overall trend for February and March after an exceptional January”, and that the bank “recognises the importance of continued capital generation” and it remains “committed to prioritising returns over growth and to reducing leverage”.

For any traders wondering if there are any well run banks still operating without Government assistance, the Barclays statement today is an absolute vindication of the bank’s Credit Crunch strategy, and the knock down price of the Lehman acquisition demonstrates the workings of an astute and forward thinking management team. There is still upside in Barclays shares, and I am adding to my collection, with a short term target price of 330p

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[BlueIndex]

Hi tafita. My stop on BATS is at 1496

thanks

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[BlueIndex]

Treble Relief
May 8th, 2009

Having been involved at various levels with business incubators and fledgling firms, I am a fan of companies like 3i (III) because they invest in the future of business. This is often a fraught and time consuming process, but get it right and occasionally it can be compared to stumbling across the holy grail

So the recent well-documented crisis at 3i has been a source of concern, particularly after well respected CEO Philip Yea left last November. But 3i has weathered the crisis better than some, and into an improving market the private equity firm this morning announced a fully underwritten GBP700m rights issues to reduce debt. The group also reported losses of GBP1.95bn from a gain of GBP828m last year, along with a 54% decline in full-year net asset value per share and total net debt of GBP1.1bn. Total assets under management also fell to GBP8.02bn from GBP9.79bn last time. CEO Michael Queen said the rights issue will “strengthen not only our balance sheet but also our market position”, and looking forward he added “while the operating environment remains very challenging, I have great confidence in 3i’s intrinsic strengths”. The new shares will be priced at 135 pence, a 60% discount to Thursday’s close! and a 40% discount to the theoretical ex-rights price.

The precipitous fall in the 3i share price is well documented, and there is no doubt that the cash position and funding crisis has been weighing on the stock. Today’s fully underwritten rights issue removes any uncertainties over funding, and to echo CEO Michael Queen’s comments, “3i as a business has great intrinsic strengths”. I now expect to see further progress from the shares, and am a buyer with a short term target price of 375p

Blue Index :|

 

[ellie74]

Hi Blue Index,

the price is already 398?

 

[tafita]

Hi Blue Index,

the price is already 398?

Indeed it is. Would you now consider holding for a longer term view or cut it now? My time frame is always longer term so a break of your target of 375 would be where I would normally take a position.