Monday’s Stock Market Report featuring Tate & Lyle, Reckitt Benckiser, Diploma, CamKids and Optimal Payments

The Markets

The Japanese economy has slid back into recession, GDP dropping at an annualised rate of 1.6% in the third quarter. The economy contracted sharply in the second quarter, but analysts believed that the fall had been due to a rise in sales taxes in April and had expected the economy to have recovered by September. Household consumption was well below projected levels and the government is now publicly considering holding a snap election in December to gain a mandate to postpone a further scheduled tax rise that had been legislated by the previous administration.

Fresh data on the UK housing market from online broker Rightmove suggests that average asking prices for properties coming on to the market fell by 1.7% in October and that sales volumes were below normal seasonal levels. Prices remain 8.5% higher than they were at the same point last year after increases in eight of the last 12 months. Some market analysts believe that there will be more market shifts in the near future, with Robert Gardner, Nationwide’s Chief Economist, commenting that, “some forward-looking indicators, such as new buyer inquiries, suggest that activity may soften further in the near term, especially in London”.

At the London close the Dow Jones had decreased by 18.86 points to 17,616.07 and the Nasdaq had fall by 23.96 points to 4,221.70.

In London the FTSE 100 closed up by 17.60 points at 6,671.97 and the FTSE 250 rose by 4.51 points to 15,648.63. The FTSE All-Share had increased by 7.43 points to 3,562.94 while the FTSE AIM Index shrank by 0.04 points to 716.41.

Broker Notes

Mining outfit Stratex International (STI) has been rated as a”buy” by Northland Capital, with a target price of 7.7p after drilling recommenced at the firm’s Dalafin project in Senegal. The first results are expected in early 2015 and there are broad zones of gold mineralisation that have been identified. Northland is positive about the development area, which has produced positive testing results in the past and could deliver significant returns in the future. The shares fell by 14.5p to 276.7p

Cantor Fitzgerald has reiterated its view on Rambler Metals & Mining (RMM) as the firm announced an agreement regarding a potential re-opening of the Hammerdown gold mine in Newfoundland. The broker maintained a “buy” stance and a target price of 50p. Rambler would operate the mine on a toll basis, which Cantor Fitzgerald believes would minimise capital requirements and allow a timely return to full production. The shares closed the day flat at 26.25p.

Liberum Capital initiated coverage on ingredients outfit Tate & Lyle (TATE) with a “sell” rating and a 560p target price. Other brokers may be a little more sweet on the firm, with Berenberg Bank and Numis Securities maintaining “hold” ratings, but Credit Suisse has an “underperform” position and a 600p target price in place, which was reiterated earlier this month. The shares declined by 6p to 638p.

Brokers not sweet on Tate & Lyle

Blue Chips.

Consumer goods giant Reckitt Benckiser (RB.) will spin off its drug addiction specialist business into a newly listed UK entity. The new company, which will be named Indivior and made revenues of $1.2 billion last year, is expected to list on 23rd December, assuming shareholder approval is given for the deal 12 says earlier. Shareholders will receive 1 new share in Indivior for every Reckitt one they hold. Shares in Reckitt Benckiser slipped by 5p to 5,320p, with the firm now looking to focus on its consumer health and hygiene businesses.

Real estate investment trust Hammerson (HMSO) has bought major stakes in three European shopping centres through its VIA Outlets joint venture and will contribute €57 million (45 million pounds) towards the consideration. The malls are located in Portugal, Sweden and the Czech Republic, and offer an initial yield on investment of 8%, with “attractive” return prospects being seen in the longer term. Hammerson holds a 47% position in VIA Outlets. The shares climbed up by 3p to 617p.

Hammerson shops for new centres in European markets

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Mid Caps

International ground engineering outfit Keller Group (KLR) saw steady growth in US markets over the four months to 31st October as the construction industry continued to recover. However, there was a flat performance in Canada, European markets remained troubled and initial signs of a recovery in Australia have dissipated in recent months. Keller’s Asian operations have been busy and overall trading for the full year should be in line with market expectations. The shares dropped by 54.5p to 820p.

Management services provider Mitie (MTO) fell to a statutory loss of 1.3 million pounds for the six months ended 30th September due to higher than expected restructuring fees as it exited engineering and asset management activities. The firm has no further liabilities from these loss making businesses and underlying profits excluding these one off charges rose by 3% relative to the same period of the prior year. The shares declined by 14.5p to 276.7p.

Specialist technical services firm Diploma (DPLM) recorded revenues of 305.8 million pounds for the year ended 30th September. This was an increase of 7% from the prior year despite a significant negative impact of the stronger pound on the 75% of the company’s income that is generated overseas. Diploma’s recent acquisitions are said to have integrated well, including the purchase of Technopath Distribution, which has permitted the expansion of the Group Healthcare business into the UK and Ireland. The shares rose by 13p to 698p.

Diploma earns high marks in testing environment

Small Caps

Shares in CamKids (CAMK) plunged by 7p 39.5p after the China based childrens’ clothing outfit downgraded its guidance for 2015. While the firm expects to meet expectations for 2014 its distributors are adopting a more cautious approach towards next year on the back of the macro-economic backdrop in China and an associated drop in consumer spending. CamKids has also been hit by the final value of its spring/summer order book being down by 13% compared to last year. Broker Allenby reduced its earnings forecasts down by 20% on the back of the news but still thinks the shares have a compelling valuation as they trade on just over 2 times forecasts for next year and offer a dividend yield of over 10%.

Medical research outfit ReNeuron (RENE) increased its development outlays from 2.75 million pounds to 3.75 million pounds in the six months to September as the company commenced additional clinical tests for its stem cell products. ReNeuron’s CTX therapy has shown positive results for treating stroke disability and the company will move into a new manufacturing facility in South Wales during early 2015. The shares fell by 0.125p to 3.25p.

Managed IT services company Redcentric (RCN) made revenues of 46.8 million pounds during the six months ended 30th September, more than double the level it brought in during the same period of 2013 as the company’s recent acquisitions integrated well. Management believe that full year results will meet market expectations and that the foundations for growth over a number of years are in place. The share price rose by 1.5p to 131p.

Specialist IT services firm SCISYS (SSY) took part in the European Space Agency’s Rosetta mission that landed a probe on the comet 67P/Churyumov-Gerasimenko, developing the mission control software system that let the ESA track the probe and issue command. SCISYS has spent over 25 man years on the project since the probe was launched in 2004. Shares in SCISYS finished the day flat at 93p.

Recruitment and outsourced services provider Servoca (SVCA) has won the Best Performing PLC award at the Recruitment International Awards. The company exceeded management expectations for the year ended 30th September, with a strong performance in the Education sector during September and positive developments in the Healthcare arm driving the improvement. Servoca shares ended the day flat at 17.5p.

Online processing firm Optimal Payments (OPAY).has continued to trade well in the second half of 2014 and management believe that results for the full year will be at least in line with market expectations. The firm’s NETELLER and NETBANX brands have both delivered good revenue growth, with the December trading period traditionally the busiest time of year for the business. Optimal’s expansion into US markets is said to have gone well and the company’s reliance on its largest clients is falling. The shares grew by 57p to 377p.

Perfect performance for Optimal Payments