The Markets
The Chinese stock market suffered its largest fall in over six years this morning after regulators began to clamp down on high risk investment strategies. Margin trading came in for particular punishment, with three large brokers banned from opening new trading accounts for three months after they allowed customers to roll-over margin trading contracts. Hao Hong, a Strategist at Bocom International Holdings in Hong Kong, said that, “regulators are concerned that shares have run too hard, too fast. They want a measured increase in the stock market. After all, margin financing is one of the reasons for people to be bullish on brokerage stocks, and these stocks have run particularly hard”.
A former senior advisor to the Saudi Minister of Petroleum has said that the country can cope with low oil prices for a minimum of eight years as the nation aims to defend its global market share by cutting prices to drive out marginal producers. However, Mohammed al-Sabban also said that further spending cuts would be necessary to allow the government to stretch its reserves to that point, according to comments published today by the BBC.
The US markets were closed for Martin Luther King Day.
In London the FTSE 100 closed up by 35.26 points at 6,585.53 and the FTSE 250 climbed by 144.68 points to 16,067.19. The FTSE All-Share increased by 20.74 points to 3,540.97 while the FTSE AIM Index rose by 1.44 points to 697.21.
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Broker Notes
Beaufort Securities issued a “sell” rating and 1.12p target price for miner Sula Iron & Gold (SULA) despite some positive indicative results for tantalum at its Ferensola project in Sierra Leone. The broker says that the news enhances the prospectivity of the region but does not confirm mineralisation and the firm has yet to realise any production. Sula shares dropped by 0.03p to 1.1p.
Northland Capital reiterated its “buy” position and 7.4p target price on gold-focused exploration firm Stratex International (STI) despite the company’s most recent drilling programme at the Fare South Prospect failing to provide a sound basis for undertaking resource estimation. This means that deferred payments to Silvrex will not be made and the group continues to prioritise the Madina Bafe site. The shares fell by 0.175p to 1.875p.
Supermarket Tesco (TSCO) has been upgraded from “overweight” to “equal weight” by Morgan Stanley, with the bank saying that the market is underestimating the potential for profit margin improvements at the retailer. Morgan Stanley did raise concerns that Tesco could reignite the supermarket price war in its attempts to attract additional customers. The shares grew by 2.35p to 221.4p.
Broker stops discounting supermarket
Blue Chips.
Energy giant Centrica (CNA) said that its British Gas arm will cut household gas bills by around 5% from the end of next month, reflecting the recent fall in wholesale gas prices. Given the current volatility of hydrocarbon costs, these prices will remain under review for the time being and the firm will respond as necessary to upward or downward shifts. Preliminary results for 2014 will be published on 19th February. Centrica shares fell by 0.1p to 264.8p.
Reduced gas prices don’t fire up Centrica
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Mid Caps
Infrastructure specialist Balfour Beatty (BBY) has won a new public works contract framework worth up to 1.5 billion pounds with individual projects expected to be valued at up to 40 million pounds. The range of measures is expected to range from street repairs and coastal defense works to new roads, bridges and light rail schemes. Balfour Beatty will be sole contractor. The shares rose by 2.1p to 206.1p.
Construction and civil engineering specialist Kier Group (KIE) has won more than 145 million pounds worth of new contracts in the Middle East since the start of the calender year. In Dubai, the company has been named preferred bidder on a 100 million pound mixed use development and smaller projects throughout the region make up the total. Shares in the firm rose by 2p to 1,588p.
Brewer and pub operator Greene King (GNK) recorded a 2% rise in like-for-like retail sales over the Christmas and New Year period and sales for the six weeks ended 11th January were in line with results from 2013 despite very tough comparatives. Own-brewed beer volumes were up by 5.2% and management believe that there is further growth potential in home drinking and exports markets. The shares climbed by 1.5p to 788.5p.
Has Greene King bottled success?
Small Caps
Electronic display designer Densitron Technologies (DSN) saw significant growth over the year ending 31st December with orders increasing by 17%, but operating profits remained marginally below those in 2013. Management say that the order book has been substantially improved and believe that growth can continue over the course of 2015. Shares in Densitron rose by 0.25p to 5.25p.
Cloud computing services provider Nasstar (NASA) said the integration of its three trading subsidiaries has been completed ahead of schedule, bringing costs down through synergies and meaning that EBITDA for 2014 will be ahead of prior market expectations. Management believe that further growth can be achieved by better cross-selling of the group’s services. Full results will be published in early April. The shares closed the day flat at 8.75p.
Commodities risk management solutions outfit Brady (BRY) traded in line with expectations through the year ended 31st December and cash at the year ended was well ahead of forecast levels. The group won 15 new contracts in 2014, including deals with the world’s largest nickel producer and a leading aluminium firm, as well as expanding its work with existing clients. The shares climbed by 2p to 82.5p.
Oil recycling technology firm Hydrodec (HYR) expects revenues for 2014 to be around $54 million (35.6 million pounds). a 35% improvement over the prior year, caused by a 26% rise in oil sales volumes. Management say that margins also improved despite falling sales prices and increasingly challenging markets in the UK and Australia. The firm also settled a long running insurance dispute for a net profit of $1.2 million (0.8 million pounds) relative to the written off assets. The shares dropped by 0.875p to 8.375p.
Retail and food service industry baker Finsbury Food Group (FIF) earned revenues of 107.6 million pounds over the six months ended 27th December, a 24% increase over the prior year, driven primarily by the acquisition of Fletchers at the end of October. New products, including the firm’s range of Frozen cakes, also contributed. Management believe the firm is well placed for further growth in the coming years. The shares rose by 4.25p to 63.25p.
Baker rises as it sees more dough