Friday’s Stock Market Report featuring Apple, Sanlam, BP, Thomas Cook and DFS Furniture

The Markets

There was further good news from the US economy, with the country adding 295,000 jobs in February, the 12th consecutive month that has seen over 200,000 positions created. The figures were higher than analyst expectations and also helped the unemployment rate fall from 5.7% to 5.5%. While the number of US mining jobs fell in February the figures were boosted by hiring in food & drink outlets, professional and business services, and warehousing. In reaction the US dollar rose by around 1.5% against the Euro to 92 cents.

Also in the US, it has been confirmed that tech giant Apple will be added to the Dow Jones Industrial Average from 19th March. The iPhone maker, which is the largest US firm by market capitalisation, will replace long standing constituent AT&T, which first joined the Dow in 1916. Apple joins the 30 company, price weighted index as on 18th March shares in Visa will undergo a four for one split, a move which will reduce the weighting of the IT sector in the index, with Apple’s inclusion offsetting this impact. At the London close shares in Apple were trading up by $1.32 at $127.5.

At the London close the Dow Jones had fallen by 206.18 points to 17,929.54 and the Nasdaq was down by 41.44 points at 4,410.61.

In London the FTSE 100 closed down by 49.34 points at 6,911.80 and the FTSE 250 fell by 38.10 to 17,272.21. The FTSE All-Share slipped by 23.05 points to 3,728.95 but the FTSE AIM Index closed up by 3.23 at 717.35.

Broker Notes

Investec updated on rival financial services business Sanlam (SLMJ) by issuing a “sell” stance. While the broker acknowledged that the Johannesburg listed business produced a solid and consistent performance in 2014 it said that investors may have been disappointed by the lower than expected level of operating earnings. Investec believes that the stock is expensive at current levels and sets a target price of 7000cps based on a forward PE multiple of 14 times, compared to the current 15 times. Investec added that the implied return from current levels is 0%.

Broker Westhouse sees significant upside in Genel Energy (GENL), having a “buy” stance and 1,000p target, implying 72% upside from current levels. The broker commented that the oil firm, which has assets in Iraqi Kurdistan, reported 2014 results in line with expectations and that regular domestic sales at parity price have helped to alleviate some of the market’s concern over near-term cash generation. With the Iraq budget passed into law last month, which will enable the financial implementation of an interim oil deal between the Kurdistan Regional Government and the Iraqi government, the broker expects progress will be made towards regular export payments in 2015. Westhouse added that Genel remains a low-cost producer with a material production base, no balance sheet risk and unique access to material gas resources in Kurdistan. Genel shares closed the day down by 22p at 581p.

Blue Chips

On a quiet day for the blue-chips oil giant BP (BP.) revealed it has signed the final agreements to develop five trillion cubic feet of gas resources and 55 million barrels of condensates at the West Nile Delta project in Egypt. The firm has a 65% stake in the project and along with its partners will invest around $12 billion. Production, which will start in 2017, is expected to reach up to 1.2 billion cubic feet a day, equivalent to around 25% of Egypt’s current gas production. All the produced gas will be fed into the country’s national gas grid, helping to meet anticipated growth in local demand for energy. Shares in BP lost 5.6p, closing at 447p.

Mid Caps

Thomas Cook (TCG) has agreed a strategic partnership with global investment group Fosun International, an investor in the international travel and leisure markets, in order to find new growth opportunities. Under the deal the travel group, amongst other things, is looking to; further develop its Concept hotels; collaborate with Fosun’s other travel and leisure businesses, including Club Med; and over the medium term access the fast-growing Chinese tourism market. Assuming the plans are implemented in 2015 the travel group expects them to be earnings accretive in the financial year ended September 2016. Fosun has also agreed to invest 91.8 million pounds for a 5% stake in the business and said it is looking to buy more shares on the market to take its stake up to 10%. The markets liked the deal, with Thomas Cook shares rising by 29.6p to 150.2p.

Annual results from investments and savings business Alliance Trust (ATST) reported that NAV per share rose by 8.1% to 546.8p in 2014. The total dividend for the year, including a special payment of 2.546p, was up by 14.3% – the 48th year of consecutive dividend increases. Subsidiary Alliance Trust Investments ended the year with third party assets under management of 1.9 billion pounds, reducing losses by 23% to 3.2 million pounds, and is now among the top three firms in the UK focused on sustainable investing. Elsewhere, Alliance Trust Savings saw assets under administration ended the year up by 19% at 6.4 billion pounds. Shares in Alliance Trust slipped by 1.5p to 497.5p.

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Small Caps

On the back of yesterday’s positive update from Vertu Motors peer Cambria Automobiles (CAMB) confirmed that trading was strong in the six months to February this year. The franchised motor retailer said that new vehicle unit sales increased by 17.1% in the period, Used vehicle sales also performed well, with volumes up by 2.1% but flat on a like-for-like basis. Growth in aftersales operations also continued, with profitability currently up by 7.7% year-on-year. Cambria added that it expects new car volumes will remain robust throughout 2015, with the new car order book for March building well. Cambria shares gained 1.25p, closing at 53.5p.

Audioboom (BOOM), the spoken word audio platform operator, revealed a new agreement with supplier of in-vehicle platforms Aupeo. Under the deal Audioboom will be a global provider and delivery platform of audio content to Aupeo and will create and deliver UK, US, Australian and European news, sport, comedy and entertainment audio content directly into Aupeo’s Personal Radio in-car infotainment platform. Audioboom will earn shared revenues based on the installed base as well as a 50% share of advertising net of channel fees on clips listed to for over 30 seconds. Shares in Audioboom slipped by 0.25p to 8.75p. For more analysis of the company read the March edition of Spreadbet Magazine, out tomorrow.

DFS Furniture (DFS), the sofa specialist, joined the Main Market of the LSE at a price of 255p per share, valuing the business at 543.2 million pounds. This was at the lower range of the previously announced 245p – 310p IPO price range. DFS, which has a 25.7% share of the $3 billion upholstered furniture market, raised 206.4 million pounds, with 98 million going to the company and the remainder to selling shareholders. The net funds will be mainly used to pay down debt. DFS, which will announce interims later this month, was previously listed between 1993 and 2004 before being taken private.

Cancer diagnostics business ValiRx (VAL) has raised 800,000 pounds after placing 400 million new shares at a price of 0.2p each. The money will be used to progress its refractory prostrate cancer candidate VAL201 via dose escalation and anti-tumour efficacy studies and to progress lung cancer treatment candidate VAL401 towards the clinic. ValiRx will also pursue technological developments for its GeneICE platform and Biomarker technologies. The share price fell by 0.01p to 0.21p.

Shares in Falkland Oil & Gas (FOGL) lost 2p to 29.75p after the oil & gas explorer confirmed that the Zebedee exploration well was spudded by operator Premier Oil today. The well is located on licence PL004b, in which Falkland has a 40% working interest. Drilling will test a total of seven stacked fan bodies which the company estimates have chances of success ranging between 10% and 50%. Estimated to take 30 days to drill, Zebedee has mid case unrisked gross prospective resources of a total 281 million barrels of oil equivalent, with Falkland’s share of the cost being around $22 million.