Tuesday’s Stock Market report featuring Prudential, easyJet, Cineworld, Tower Resources and Tanfield

The Markets

Figures from the Office for National Statistics showed that UK inflation rose to an annual rate of 1.3% in October, up from 1.2% a month earlier due to rises in transportation costs, recreational and cultural expenditures. In contrast, furniture prices fell by 1.1% year-on-year. The rise will slightly relieve pressure on the Bank of England to cut interest rates and reduces the likelihood that inflation will move outside of the Bank’s 1% grace window each side of its 2% target rate. David Kern, chief economist at the British Chambers of Commerce said that despite the small increase, “the impact of low oil prices will have a noticeable impact in coming months, causing inflation to drop. We expect inflation to fluctuate around 1% until late 2015, before rising towards 2.0% in 2016“.

UK grocery sales fell for the first time in over 20 years during the 12 weeks to 9th November as escalating price wars and the falling cost of food commodities hit supermarket sales. The overall cost of an average basic shopping basket was 0.4% lower than a year ago according to survey figures from market researchers Kantar World Panel. Analysts say that competing on price alone won’t turn around supermarket fortunes, with Rob Joyce from Goldman Sachs suggesting that as many as 1 in 5 stores would have to be shut by traditional supermarket chains in order to recover from recent changes, such as the German discounters entering the UK market.

At the London close the Dow Jones had increased by 36.3 points to 17,684.05 and the Nasdaq had risen by 23.19 points to 4,236.97.

In London the FTSE 100 closed up by 37.16 points at 6,709.13 and the FTSE 250 rose by 50.80 points to 15,699.43. The FTSE All-Share had increased by 18.07 points to 3,581.01 while the FTSE AIM Index grew by 2.20 points to 718.61.

Broker Notes

Global Energy Development (GED) has been rated as a “buy” by Northland Capital after the firm’s general meeting approved plans for the sale of the company’s main production assets in Columbia’s Llanos Valley for a cash consideration of $50 million (31.9 million pounds). The proceeds of the sale will be used to pay down debts of $7.9 million (5 million pounds) and management will weigh available options for the use of the remaining moneys after the completion of the deal. The shares ended the day flat at 46.5p.

Shore Capital has reiterated its “buy” rating on Prudential (PRU) after new business grew by 5% in the third quarter despite major impacts from the adverse foreign exchange situation. The firm delivered improved profits in the UK, US and Asia, and Shore believe’s that the group’s balance sheet remains solid, with more than 134 billion pounds under management and accelerating net inflows. The shares rose by 16p to 1,491p.

Cantor Fitzgerald has reiterated its “buy” stance on Patagonia Gold (PGD) after the company announced a new share offering to raise up to 8.73 million pounds, with the firm’s chairman part of a consortium that has committed over 3.8 million pounds . The new shares will be put to the vote at a general meeting and are expected to be admitted to trading by 9th December. The broker is reassured by the management’s financial commitment and retains faith in the potential of the firm’s assets. The shares ended the day flat at 5.25p.

Cantor sees golden opportunity in Patagonia

Blue Chips

Engineering components manufacturer Meggitt (MGGT) has won a contract worth more than $57 million (36.4 million pounds) to produce heating, ventilation and air conditioning systems for a defense project at General Dynamics Land Systems Canada. The system will be used to cool and heat the driver and crew and will be similar to the mechanisms that have been supplied to General Dynamics by Meggitt for the M1A2 SEP battle tank. The shares fell by 5p to 473.2p.

Profits have taken off at budget airline easyJet (EZJ) as soaring passenger numbers contributed to revenues of 4.5 billion pounds for the year ended 30th September. Pre-tax profits jumped by 21.5% to 581 million pounds for the year with load factors up by 130 basis points and non-fuel costs per seat dropping by 1.2%. easyJet expects modest cost increases to occur this year and shares in the firm declined by 19p to 1,525p.

Profits fly but shares slip at budget airline

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Mid Caps

High-end estate agents Savills (SVS) says that trading volumes in London and Hong Kong are flagging, but improvements elsewhere in the UK and Asia are helping to pick up any slack. Other business areas including asset management and European markets have performed in line with expectations. Management believe that the drop in London trading is partially due to uncertainty in the UK political environment and the possible implementation of a “Mansion Tax”. The shares climbed upwards by 16.5p to 655p.

Aircraft services provider BBA Aviation (BBA) said that trading in the four months ended 31st October was broadly in line with expectations, with organic revenues up 5% from the same period of the prior year, as the flight services market continued to recover well. However, the aftermarket services arm of the business was flat and revenues dropped in the legacy support division despite two major contract wins. The company also settled a tax dispute with the IRS relating to activities between 2006-2010 that led to a $20.6 million (13.17 million pounds) exceptional gain. The shares dropped by 11.6p to 343.9p.

Rising ticket prices and improved retail sales helped entertainment group Cineworld (CINE) increase revenues by 0.7% over the 46 weeks to 13th November, despite a 0.9% drop in UK visitor numbers. There were also positive developments in Central Europe and Israel, where admissions rose. Management are positive about the coming period, as the upcoming UK film release schedule looks more favourable. The shares rose by 9.1p to 345.4p.

Good viewing for Cineworld shareholders

Small Caps

Oil & gas exploration company Tower Resources (TRP) saw its shares fall by 0.075p to 0.65p after the High Court of Kenya placed a temporary injunction on the planned Badada-1 well in the North East of the country. Tower owns a 15% working interest in the site and the company and its partners are confident that the injunction will be revoked and work can progress towards the projected spud in the first quarter of 2015.

MCB Finance (MCRB) confirmed that it has received a preliminary approach relating to a potential cash offer by International Personal Finance. Talks are ongoing and further announcements will be made in due course. MCB also released results for the three months ended 30th September showing revenues of €9.5 million (7.5 million pounds), a 14.7% improvement over the comparative period as the firm’s lending expanded. The shares rose by 12p to 64.5p.

Conventional hydrocarbon firm UK Oil & Gas Investment (UKOG) made a loss before tax of 0.9 million pounds in the year ended 30th September as the firm expanded its holdings by purchasing three of Northern Petroleum’s subsidiaries, a 20% position in Horse Hill Development and a 6% stake in Argus Energy. The board views the coming year as an exciting period, with opportunities to build value in its current portfolio while continuing to seek out attractive acquisition targets. The shares dropped by 0.01p to 0.43p.

Exploration and development outfit Bushveld Minerals (BMN) saw its pre-tax loss widen to 1.5 million pounds for the year ended 31st July after administrative expenses doubled to 1.7 million pounds. The company continues to work towards first production at its vanadium and tin projects in South Africa, and expects to complete a pre-feasibility study for the Limpopo vanadium site during the first quarter of next year. The shares fell by 0.075p to 2.98p.

The High Court has sanctioned a Scheme of Arrangement for Sodexo’s acquisition of Motivcom (MCM) but the court still has to confirm the capital reduction at a second hearing before the scheme can become effective. The second hearing is planned to take place on the 20th of this month and shares in Motivcom will be suspended that morning. Once all permissions are in place then owners of Motivcom stock will be paid a consideration of 148p per share by the first week of December. The shares ended the day flat at 147p.

Engineering and powered access specialist Tanfield (TAN) said that its Snorkel business has increased production significantly over the course of 2014 and this improvement brings the firm closer to meeting its targets for the realisation of its remaining 49% holding in the entity. Management believe that the subsidiary is getting nearer toward being self-supporting, but the cyclical nature of the construction equipment industry means that the coming months will most likely be quiet. Shares in Tanfield grew by 1.75p to 18p.