Wednesday’s Stock Market Report featuring National Grid, Royal Mail, ICAP, Telecom Plus and Falanx

6 mins. to read

The Markets

The Bank of England’s Monetary Policy Committee once again voted 7-2 in favour of maintaining UK interest rates at their current level of 0.5%. The two rebels, Ian McCafferty and Martin Weale, voted for a rise to 0.75%. The consensus view of the body was that, “the outlook for inflation in the medium term justified maintaining the current stance of monetary policy” and that “a prolonged period in which inflation was below the target created at least the possibility that medium-term expectations of inflation would begin to drift downwards. This had the potential to lengthen the period for which inflation itself would remain below 2%”.

Real wages in the UK fell for the 6th consecutive year over the 12 months to April, according to new figures from the Office for National Statistics. The numbers showed a drop of 1.6% as inflation continued to outpace pay packets. Regionally, incomes rose the most in London and most slowly in Northern Ireland. Median gross weekly earnings in the public sector rose by 1%, while those in the private sector lagged at 0.7%.

At the London close the Dow Jones had decreased by 14.38 points to 17,673.44 and the Nasdaq had fall by 20.75 points to 4,221.75.

In London the FTSE 100 closed down by 12.53 points at 6,696.60 and the FTSE 250 fell by 97.55 points to 15,601.88. The FTSE All-Share decreased by 9.13 points to 3,571.88 while the FTSE AIM Index shrank by 2.46 points to 716.15.





Broker Notes

Cantor Fitzgerald retained its “buy” rating and 32p target price on Orosur Mining (OMI) after the firm signed a non-binding deal to option out up to 40% of its interest in the Anillo project in Chile in exchange for $3.5 million (2.2 million pounds) in investment. The broker views this as a positive development as it lets the firm keep a significant interest in the project whilst dramatically reducing Orosur’s financial commitments. The shares rose by 0.375p to 12.125p.

W Resources (WRES) has had its “buy” rating and 1.5p target price reiterated by Northland Capital after the company successfully installed new feed systems as it works towards increasing its production capacity and recovery levels. The company is consulting on potential measures to electrostatically separate tin from its tungsten concentrates and plans to begin production in 2015. The shares dropped by 0.01p to 0.48p.

Deutsche Bank has upgraded its rating on National Grid (NG.) from a “sell” to a “hold” and raised its target price to 880p as excellent operational performance convinced the bank that the shares will continue to trade at a significant premium over its regulatory asset base. The broker also believes that the firm’s 4.7% dividend rate is sustainable over the next few years, and continues to view United Utilities as a good defensive investment. National Grid shares rose by 5p to 960.5p.

National Grid loses broker’s negative charge

Blue Chips

Product testing specialist Intertek (ITRK) expects full year organic revenue growth of around 2,5% and profit margins to be in line with 2013. This is despite a 5.1% decline in group revenues over the year to 31st October as the firm exited a number of low value contracts. The company has been adversely affected by developments in foreign exchange markets and the commodities division continues to suffer as the minerals market remains weak. The shares fell by 206p to 2,447p.

UK wide letter deliveries may be under threat, according to Royal Mail (RMG). This comes as de-regulated rivals cherry pick profitable urban routes and undermine the economic foundation of the firm’s “one price” UK delivery policy. Revenues for the six months to 28th September were broadly flat against the same period of the prior year, but underlying profits before tax fell by 6.4% to 218 million pounds as operating expenses rose despite efforts to control costs. The shares fell by 39.2p to 430p.

Can Royal Mail deliver results under universal mandate?

Mid Caps

Communications and utilities provider Telecom Plus (TEP) has forecast record full year revenues and profits after sales rose by 8.7% to 267 million pounds for the six months ended 30th September. This came despite unseasonably warm weather reducing energy demand. Profits before tax grew by 22.2% to 15.4 million pounds and management are confident that current levels of growth can be sustained despite the threat of government action eating into margins. The shares declined by 58p to 1,280p despite the firm also upping the interim dividend by 19% to 19p per share.

Broker ICAP (IAP) recorded revenues of 620 million pounds in the six months ended 30th September, a 15% drop compared against the same period of last year due to fragile markets and a negative foreign currency environment. There was positive news in the Post Trade Risk and EBS Direct divisions however, which recorded good underlying growth, and management expect the company’s restructuring programme to generate 43 million pounds worth of savings this year. The shares fell by 43.5p to 386p.

Defence and security equipment outfit Ultra Electronics (ULE) expects to meet market expectations for 2014 as orders have remained strong in the second half of the year to date. The firm also expects to benefit from the US Government passing a continuing resolution to maintain previous military spending levels. However, the delayed passing of this measure will have an effect on the timing of income and may knock some revenues into 2015. The shares dropped by 44p to 1,715p

Ultra shares sink despite detecting  positive full year performance

Small Caps

Shares in security and risk management consultancy Falanx (FLX) fell by 3p to 52.5p despite the firm anouncing a new contract win. Falanx has signed a deal to provide managed Cyber Defence services to CERT-UK, the UK’s Computer Emergency Response Team. Under the deal the firm’s Falanx Cyber business will deploy its advanced Protective Monitoring capability to protect all of CERT-UK’s data and information systems to detect and interdict cyber threats.

Clean water technology firm Mycelx Technologies (MYX) continues to face issues around the timing of its revenues, due to the company’s commitment to a number of large scale oil & gas industry projects. If no income from these projects is recognised in 2014, then full year revenues will be in the region of $16 million pounds (10.2 million pounds), but management remain confident in the firm’s longer term prospects. The shares fell by 112.5p to 225p.

On-shore oil & gas outfit Empyrean Energy (EME) had 154 producing wells in Texas at the end of September, 26 more than at the start of the quarter as the firm initiated its first “stack and frac” programme targeting multiple horizons at the same site. Since the end of the period, 8 additional wells are being drilled and 22 are undergoing completion operations. The shares fell by 0.25p to 14.63p.

Stellar Resources (STG) has received the latest assay results from a recent underground sampling programme carried out at the Tyn n Cornel section of the Clogau St David’s gold mine in Wales. The firm is also expecting results from independent geological consultants that have been commissioned to assess the exploration potential of the site and gold processing plant has been acquired that will enable a small scale pilot programme to be carried out. Shares in Stellar rose by 0.17p to 0.53p.

Technology and managed services provider Westminster Group (WSG) has secured a 21 year concession and lease arrangement from a West African government to run a number of recently constructed ferry terminals with a concession fee based on a passenger levy. The contract has total potential revenues in the region of $300 million according to the company. Management expect the deal to generate a positive contribution within the first 12 months and the deal will support Westminister’s existing airport services in the region. The share price increased by 5.5p to 34.5p.

Westminster lands big ferry deal

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