Monday’s Stock Market report featuring BG Group, Tullow Oil, Carillion, Trakm8 and Bonmarche

The Markets

The UK manufacturing sector advanced last month according to the latest PMI survey data, which suggested that growth in industry rose slightly and hit a four month high in November. Job creation was also at its highest point since July as the UK recovery cemented itself. This was despite falling export sales caused by the strong pound, along with weak international growth patterns. At the same time, the survey found that Eurozone manufacturing was performing less well than expected. Rob Dobson, Senior Economist at Markit, said that, “there is a risk that renewed rot is spreading across the region from the core”.

Moody’s has cut Japan’s credit rating from Aa3 to A1 over doubts that the country is able to reduce its outstanding debt levels given the intent of current Prime Minister Shinzo Abe’s attempts to postpone a planned sales price increase. The agency believes it unlikely that any deficit reduction would occur before 2020. It was also suggested that moves to increase inflation via quantitative easing could increase borrowing costs. Thomas Byrne, senior vice president of Moody’s sovereign risk group, commented, “The government has in effect put one foot on the brake and another on the accelerator”.

At the London close the Dow Jones had decreased by 50.45 points to 17,777.79 and the Nasdaq shrank by 51.77 points to 4,286.01.

In London the FTSE 100 closed down by 66.25 points at 6,656.37 and the FTSE 250 fell by 131.99 points to 15,719.77. The FTSE All-Share decreased by 34.38 points to 3,558.94 while the FTSE AIM Index shrank by 12.75 points to 712.91.

Broker Notes

Westhouse Securities reiterated its “buy” stance on Tullow Oil (TLW) after OPEC’s decision not to cut petroleum production, with the broker saying that Tullow’s financial assumptions hold up despite the current low price of oil. Opinion elsewhere is more cautious, with Deutsche Bank and Credit Suisse maintaining “hold” and “neutral” ratings, and JP Morgan Cazenove downgrading the stock from “overweight” to “neutral”. The shares fell by 25.5p to 400.5p.

Beaufort Securities believes that theme park and attraction operator Merlin Entertainment (MERL) is worth a “buy” after the company announced the construction of its 6th LEGOLAND park and its first in South Korea. The broker expects that this development will be well received and believes that it will help Merlin cement its position in Asia, where it already has assets in Malaysia and is developing others in Dubai. The shares dropped by 7.9p to 371.1p.

Boiler manufacturer Flowgroup (FLOW) has been rated as a “buy” by Cenkos after the firm announced that it has arranged a financing programme for its customers with Zopa, Europe’s largest peer-to-peer lending platform. Flowgroup itself has also received FCA authorisation for limited credit broking. Cenkos believes that the programme will help increase sales and, as the loans are 3rd party and non-recourse to Flowgroup, there is no material increase in risk for the firm. Despite the news shares in Flowgroup sank by 2.625p to 44.5p.

Broker says finance deal can heal up boiler firm

Blue Chips

Gas producer BG Group (BG.) has revised the remuneration details of its new CEO, Helge Lund, after facing criticism from shareholders that his package was too generous. Lund will now only receive an initial share award from the firm worth around 4.7 million pounds. This is in contrast to the previously proposed 10 million pound deal which caused an investor backlash. Lund, previously CEO of Statoil, will join BG Group on 2nd March next year and now has 62% of his package subject to performance criteria in the first year. Amongst many other perks, he will be paid a basic salary of 1.5 million per annum for the first five years. In reaction to the news BG shares edged up by 4.4p to 904.6p.

Underlying profits before tax at financial services firm Aberdeen Asset Management (ADN) edged up 2% to 490 million pounds over the highly volatile year ended 30th September, but on a statutory basis earnings fell by 9% to 350 million pounds due to costs related to the acquisition and integration of Scottish Widows Investment Partnership. Assets under management rose by 62% to 324.4 billion pounds, despite net outflows of 20.4 billion pounds. The shares rose by 7.6p to 457.5p.

Is Aberdeen Asset Management a breed apart?

Mid Caps

Support services provider Carillion (CLLN) has agreed to buy a 60% position in Rokstad Power Corporation, in a move designed to supplement Carillion’s abilities in the electrical power transmission and distribution sector. The total cash consideration will be up to 33 million pounds depending on the Canadian outfit’s performance over the period until July 2017. Carillion has commited to buying the remaining 40% of the firm within the next five years. The shares declined by 3.7p to 343.9p.

Engineering firm Morgan Advanced Materials (MGAM) noted Vesuvius’ (VSVS) announcement that it will not pursue a proposed share-based nil premium offer for Morgan. The board’s review of the proposal led it to believe that the offer would have fundamentally undervalued Morgan and would have diluted stockholder returns, leading to them to unanimously recommend that it be rejected. Morgan shares climbed up by 8.6p to 300.4p, while those in Vesuvius slipped by 3.9p to 412.4p.

Vesuvius ceases assault on Morgan

Small Caps

Vehicle telematics specialist Trakm8 (TRAK) significantly improved its pre-tax profits for the six months ended 30th September, posting a gain of 0.71 million pounds, up from from 0.02 million in the same period last year. This came as revenues tripled to 8.4 million pounds and recurring revenues expanded to 5.3 million pounds. Trakm8 benefitted from 66% growth in its core business during the period, along with a full six months’ contribution from the acquisition of BOX Telematics. The firm also agreed new financing arrangements with HSBC during the period, increasing its net credit by around 2 million pounds. Trakm8 shares rose by 4p to 72.5p.

Oil and gas explorer Petroceltic International (PCI) saw its shares plunge by 60.5p to 113.5p after Dragon Oil withdrew its proposed offer in light of current market conditions. Petroceltic’s board believe that the firm can continue to operate independently and its ongoing development projects are proceeding well. Management believe that the company’s flagship gas project will be only minimally affected by the current oil price volatility.

Just over a year after listing on AIM the womenswear retailer Bonmarche (BON) reported that it increased revenues for the half year ended 27th September by 11.8% to 91.1 million pounds. However, management said that recent months had performed less well than they had hoped as warm weather dampened demand for winter ranges. This means that the company’s hopes of beating the market’s full year expectations have been dashed and overall performance has now moved closer to forecast levels. Shares in the firm fell by 2.5p to 267p, with Bonmarche also announcing an interim dividend of 2.3p per share.

Housebuilder Inland Homes (INL) said that private completions have increased in the second half of 2014 as the firm sold 164 properties and generated revenues of 38.4 million pounds in the period since 1st July. Inland is also at an advanced stage of negotiations for the sale of 205 units at the Drayton Garden Village development site and has over 30 million pounds of confirmed forwards sales. The shares dropped by 0.5p to 58.5p.

Virtual queuing outfit Accesso Technologies (ACSO) has been trading well so far during the second half of the year ending 31st December and the firm has won a number of new contracts. This has led management to believe that full year profits before taxation and cash generation will exceed current market expectations. Accesso has sold over 23.5 million tickets on behalf of its customers during 2014 to date, buoyed by good weather conditions across Europe. The shares rose by 8.5p to 627.5p.Queuing firm at the head of the pack

Queuing firm at the head of the pack