Thursday’s Stock Market Report featuring SABMiller, Marston’s, Poundland Mulberry and Monitise

The Markets

The Organization of Petroleum Exporting Companies (OPEC) resisted calls to cut production quotas at a meeting held today in Vienna. Brent crude hit a fresh four year low of $74.79 (47.50 pounds) a barrel, with prices dropping by over 30% since June. A number of cartel members have expressed concerns as the oil price has fallen below levels needed to balance state budgets. Market analysts say that OPEC fears losing market share to shale producers if prices remain high and volume outputs are reduced, with the secondary effect of low prices meaning that shale ceases to be economical to exploit.

German inflation has fallen to 0.6% in November according to a first estimate based on an analysis of six regional states. This would be the slowest rate of inflation growth in the country since February 2010 if confirmed and suggests that the official Eurozone figures, which are scheduled for release tomorrow, are likely to fall from the 0.4% rate that was recorded in October. However, with job creation strong, some analysts believe that there is little cause for concern in the declining rate of CPI. Carsten Brzeski, an analyst at ING, said that, “as German employment just reached another record-high in October, this drop in inflation should be inflationary rather than deflationary”.

The US markets were closed for Thanksgiving.

In London the FTSE 100 closed down 8.48 points at 6,720.69 and the FTSE 250 rose by 93.38 points to 15,881.81. The FTSE All-Share had decreased by 0.49 points to 3,593.13 while the FTSE AIM Index grew by 0.27 points to 728.72.

Broker Notes

Cantor Fitzgerald has reiterated its “buy” rating and 50p target price on Rambler Metals and Mining (RMM) after the company released its production figures which suggest that the firm is on track to meet its full year output targets. The broker also feels the shares trade at a unjustified discount against the firm’s peers, particularly given the recorded grade improvements and planned life of mine investment programmes. The shares ended the day flat at 26.25p.

Legal & General (LGEN) has kept its “buy” rating and 245p target price from Shore Capital following the announcement of a 2.5 billion pound bulk annuity deal with the TRW Pension Scheme. The broker believes that this deal once again highlights the synergies between the firm’s annuity and investment management arms, as well as the positive position of the annuities branch in light of the recent changes made to UK pensions policy. The shares rose by 1.3p to 245.2p.

Wood products firm James Latham (LTHM) has held on to its “buy” rating from Northland Capital and had its target price upped by 30p to 590p as revenue for the six months ended September grew by 8.4% to 89.1 million pounds, with significant improvements to gross profit margins. Northland believes that winter trading may be vulnerable to bad weather, but notes that current sales continue to show growth over 2013. The shares grew by 27.5p to 535p.

Broker says wood firm continues to build on foundation

Blue Chips.

Mining and minerals firm Rio Tinto (RIO) has formally approved a $350 million (222 million pounds) investment to improve future output at its Diavik diamond mine in Canada and ensure that the firm continues to benefit from the strong upward trend in the diamond sector relative to other mining outputs. It is expected that the work to open up new segments of the mine will be complete in 2018. The shares rose by 10p to 3,012p.

Brewer SABMiller (SAB) has agreed a deal with the Coca-Cola Company and a major bottler to form a new business that will be the largest soft drinks operation in African markets and will distribute roughly 40% of all Coca-Cola products sold on the continent by volume. As part of the deal, SABMiller will sell its Appletiser soft drinks label and 19 other brands to Coca-Cola for a cash consideration of $260 million (164.9 million pounds). The share price increased by 17.5p to 3,545p.

SAB now African coke kingpin

Mid Caps

Pub owner Marston’s (MARS) announced that it will sell up to 200 traditional-style pubs in order to refocus its portfolio on venues with family appeal and dining facilities. The firm divested itself of 388 “wet led” bars last year and plans to spend a substantial portion of the 144 million pound proceeds to build 25 new pub-restaurants this year. Underlying pre-tax profits fell by 3.1 million pounds to 83 million for the year to 4th October, with the dividend being upped by 5% to 6.7p per share. Management said that the smoking ban has had a significant impact on the customer base for traditional drinking establishments. The shares rose by 2p to 146.2p.

Consumer transport firm Stagecoach (SGC) announced that its joint venture with Virgin has been awarded the new InterCity East Coast rail franchise by the Department for Transport. Operations will commence in March 2015 and run until March 2023, with the firm committed to returning 2.3 billion pounds (in real terms) to the Government during the contract. Stagecoach holds a 90% in the Inter City Railways joint venture. The shares grew by 30.4p to 400.4p.

Discount retailer Poundland (PLND) saw sales in the six months ended 28th September that were 15% higher than those during the same period of 2013 at 528.2 million pounds. This came as the firm benefitted from strong trading in the UK along with the opening of its new Spanish operations. Profits before taxation rose to 9.3 million pounds despite higher capital expenditure and IPO fees. Full year results will be dependent on Christmas trading, but management believe that the firm can hit its targets. The shares rose by 6.2p to 316.2p.

Shares are most expensive thing in Poundland’s stock

Small Caps

Mobile banking and payment specialist Monitise (MONI) is in discussions to expand its commercial partnerships via new deals with Santander, Telefonica and Mastercard to accelerate the global implementation of its platform. These firms have provisionally agreed to invest a combined 49.2 million pounds in Monitise, which would increase their stake in the expanded share capital by 8.2%. The company has also reached a deal with IBM that will allow it to use IBM’s cognitive computing engine. The shares grew by 3.5p to 34p.

Fashion label Mulberry (MUL) has appointed Johnny Coca as its new creative director with effect from 8th July next year. Mr Coca is currently Head Design Director on a broad range of accessory classes at fashion outfit Celine. Management will hope that this experience and expertise can help the struggling firm turn around its fortunes, after retail sales continued to fall during the six months ended 30th September. The share price climbed up by 22.5p to 772.5p.

Engineering outfit MS International (MSI) saw its first half profits swept away as defense spending dried up, with pre-tax earnings for the six months ended 1st November dropping to 71,000 pounds from 1.9 million pounds in the prior year. The Forgings and Petrol Stations divisions both performed well, but could not make up for a 28% decline in revenues from its military products ranges. The shares dropped by 21p to 151.5p.

ULS Technology (ULS) posted a pre-tax loss for the six months ended 30th September as IPO costs tipped the firm into the red. Operating profits rose by 33% to 1.4 million pounds as sales maintained a strong upwards trajectory and margins improved by 200 basis points. The online software specialist held net cash of 3.7 million pounds at the end of the period and shares in the firm rose by 3p to 39.5p.

Premium spirits producer Distil Holdings (DIS) has received approval from the United States Alcohol and Tobacco Tax and Trade Bureau for its Blackwoods Gin to be sold and distributed throughout the USA. The firm has now submitted its proposed labelling to the body, which requires separate approval. This process is expected to take around eight weeks and Distil already has a distribution arrangement lined up, details of which will be released at a later date. The shares strengthened by 0.425p to 1.35p.

Federal Gin approval a tonic for Distil