Market overview: G4S at the bottom of the pile
Posted on: 19 Nov 2012 by Polly York

1528: Security services firm G4S is now at the bottom of the pile, with analysts at Credit Suisse highlighting the 30 basis point drop in the company’s operating (EBITA) margins as the reason why they have lowered their price target to 275p from 295p beforehand. As well, although they do expect a 10 basis point improvement in the firm’s margins for 2013 they do not see a return to 7 per cent margins until 2014. FTSE 100 up 111 to 5,716.

1500: US existing home sales for the month of October rose to 4.79m (Consensus: 4,75m). FTSE 100 up 98 to 5,704.

1355: Global medical technology business Smith & Nephew has appointed a director from AstraZeneca as its new CFO to replace Adrian Hennah when he leaves at the end of December. Julie Brown, who has worked for AstraZeneca for 25 years, will formally takeover the role in early February. The FTSE 100 is up 83 points at 5,689.

1255: Outsourcing group Serco and G4S are again leading the fallers on the top flight index following an earlier downgrade out of Credit Suisse. ‘We downgrade the stock to Neutral (from Outperform) given lower near term visibility, a temporary moderation in Serco’s organic recovery and a 28 per cent re-rating year-to-date in its estimated fiscal year 2012 price-to-earnings multiple (…) Serco trades at an estimated fiscal year 2013 price-to-earnings multiple of 12.5, a 32 per cent premium to the market that is now close to its historic median (38%),’ the broker wrote. Aegis Group, the FTSE 250 media and digital communications group, has acquired Netsociety, a performance and search agency in the Netherlands and Belgium, for an undisclosed sum. The FTSE 100 is up 67 points at 5,673.

1230: Lloyds Banking Group has announced that it is selling a portfolio of Irish commercial real estate loans as part of its strategy to de-risk its balance sheet and reduce its non-core assets. The portfolio will sell for 149m pounds, and is expected to be completed in the first quarter of 2013. The sale proceeds will be used for general corporate purposes.

1141: Shares of Barclays are leading gains on the Footsie after analysts at Goldman Sachs raised their view on the shares of the lender to buy. They write that: ‘Against a backdrop of a new senior management team and ongoing regulatory pressure, Barclays may announce plans to restructure its operations at the group’s Strategy Review (February 12, 2013). If Barclays delivers on a business plan to generate returns that match the group’s cost of capital, the stock could offer sector-leading upside, on our analysis. Meanwhile, in the absence of such a plan, the stock should have some downside support (at 0.5 times estimated 2013 BVPS for a return on equity (ROE) of 8 per cent.’ FTSE 100 up 67 to 5,672.

1115: Shares in oil and gas engineering firm Lamprell continue their helper-skelter day, now up 18 per cent. The company has said it is now on track to get back into the black during 2013, guidance on to which the bulls have latched on to with apparent glee.

1101: Sage is facing internal restructuring at a time when the industry is moving away from the desktop (an area of strength for Sage) to the cloud, which is an area of relative weakness. Despite those challenges, Sage trades on a premium to its five-year average, leaving the risks skewed to the downside, write analysts at Credit Suisse this morning. They have placed an underperform rating on shares of Sage, along with a 278p target, which means that they see potential downside of 8 per cent. FTSE 100 up 58 to 5,664.

1037: Shares of oil services firm Lamprell are exhibiting considerable volatility. The company’s stock initially moved lower by 10 per cent today after raising its loss estimate for this year, but has subsequently risen following positive remarks from analysts at Liberum Capital. The latter believe that the company’s share price does not reflect the underlying value of its business and that the outfit has ‘competitive advantages’ in many of its markets.

0921: Online grocer Ocado is leading gains on the FTSE 350 on short-covering after saying it has secured more time to pay off debts and that it will raise 35.8m pounds through a placing of shares. Lonmin is following close behind on continuing optimism after shareholder Xstrata announced that it would take part in the firm’s upcoming capital call. FTSE 100 up 59 to 5,664.

0936: Shares in outsourcing group Serco and security firm G4S are in the red this morning, pressured lower by downgrades from Credit Suisse. The broker has cut its ratings for both stocks from ‘outperform’ to ‘neutral’.

0911: The FTSE 100 has held on to gains and is trading 49 points higher at 5,654. The index finished just above 5,600 on Friday, its lowest closing price since July 26th when it ended the session at 5,573. Helping provide a lift on the index is banking group HSBC after this morning confirming press speculation that it is mulling a sale of its minority stake in Chinese insurance giant Ping An Insurance. Its 15.57 per cent stake in the firm is worth as estimated 9.5bn dollars. Meanwhile, Investec has upgraded the shares to ‘buy’ this morning, saying that the stock will outperform sector peers Lloyds and RBS. Oil titan BP is also a high riser on reports that it is considering a share repurchase programme of around four billion dollars after it banks the proceeds of the TNK-BP sale to Rosneft.

0841: Chinese house prices climbed in 35 of the 70 cities the government tracks, compared with 31 cities in September, according to data from the statistics bureau yesterday. Prices fell in 17 other metropoli. Meantime, and in Japan, the head of the country’s Liberal Democratic Party, Shinzo Abe, last night said he would prefer the next Bank of Japan governor be someone who favours inflation targetting.

0831: Miners are the best performing group on the top share index at the moment, as UK equities track gains on Wall Street and in Asia over the weekend. That purportedly on the back of optimism that the US is making progress towards avoiding the fiscal cliff. Barclays and ARM Holdings are also near the top of the leader board. Mediation efforts between Israel and Gaza Palestinians are said to be intensifying, with UN Secretary General Ban Ki Moon heading to Egypt. Back in the UK, yesterday evening Bank of England policy maker David Miles indicated that ‘if it turns out that not enough has been done (…) there is more we can do. We have not run out of ammunition.’ In other news, UK home selling prices dropped by 2.6 per cent month-on-month in November, to 236,761 pounds, Rightmove reports. The proportion of empty stores on UK high streets and in shopping centres was 11.3 per cent in October, the highest figure since the British Retail Consortium began tracking this data in July 2011 and 0.4 per cent worse than a year back. FTSE 100 bouncing back by 47 to 5,653.

Tags: aegis group | basis point | existing home sales | flight index | ftse 250 | hennah | outsourcing group | real estate loans | search agency | year 2012