Stock Market Report: featuring Admiral, Next and One Media Publishing

In: General

3 Nov 2010

Brokers’ Notes

Following the acquisition of US-based investor relations firm Blueshirt, Canaccord Genuity maintained its “buy” recommendation for Next Fifteen Communications (NFC) with an increased target price of 90p, up from 83p. As a specialist in financial PR for the US technology sector, Blueshirt not only provides an additional profitable discipline to the group’s existing business but also offers considerable opportunities for cross-selling services within the expanded group’s well established client footprint. What’s more, the broker added that, on an adjusted EV/EBITDA basis, the shares continue to trade on a significant discount to small-cap peers Huntsworth (HNT) and Chime Communications (CHW). Next Fifteen Communications shares dropped 0.5p to 69p.

Allenby Capital initiated coverage of Lombard Risk Management (LRM), the provider of compliance and risk management software to the financial services sector, with a “speculative buy” rating. The broker highlights the company’s perfect positioning from which to capitalise on the ongoing growth in its markets, driven by increasing regulation in the aftermath of the financial crisis, and forecasts a significant improvement to profitability from 2012. Lombard shares rose 0.13p to 4.88p.

Seymour Pierce re-iterated its “buy” rating for The Davis Service Group (DVSG), the European-focused textile maintenance business, as it moved its target price up from 450p to 475p. The broker believes there may be some short-term disappointment at the continued failure of the UK decontamination business that has now been classified as non-core. Nevertheless, Seymour was convinced by the group’s plan to grow the business and deliver high returns to shareholders as it continued to rate the shares as a buy. The shares slipped 1.6p to 422p.

Shore Capital reiterated its “buy” stance for the household cleaning company Reckitt Benckiser (RB.). The broker believes that the strength of the company’s third-quarter results, and particularly the magnitude of the EBIT margin expansion in the core business, are a testament to the quality and efficiency of the firm’s operations. Whilst some may be disappointed that guidance has not been raised through the year, Shore Capital would highlight that guidance has been maintained despite slowing market conditions. The shares rose 20p to 3,577p.

Blue-Chips

Admiral (ADM), the insurance group, revealed that it was on track to meet analysts’ consensus estimates for 2010 after posting a 50% rise in turnover in the third quarter ended 30th September 2010, with the UK business remaining the driving force of its success. The company, which includes brands such as Confused.com and Elephant.com, said turnover climbed to 446 million pounds. It added that vehicle count grew by 28% year-on-year to in excess of 2.3 million while also increasing premium rates. Shares in Admiral gained 46p to close at 1,673p.

Shares in Cobham (COB) fell 22.8p to 211p after the defence contractor warned about the impact of delayed and deferred contracts on fourth-quarter earnings. The maker of sophisticated avionics and surveillance systems said the delays and deferrals in the award of certain US defence and security contracts meant that “it is now unlikely that a significant increase in organic revenue growth for the full year will be achieved.”

As a result of further rises in the price of cotton, Next (NXT) expects retail price rises to be at the top end of its previously stated 5% to 8% range for the first quarter of next year. In an update for the third quarter to 30th October 2010, the company said a strong performance from its online business, Next Directory, and the continued addition of profitable new retail space, more than made up for Next Retail like-for-like which were below the midpoint of its guidance. The shares, however, fell 51p to 2,178p.

Mid-Caps

Howden Joinery (HWDN) expects pre-tax profits for the full-year to be ahead of current market expectations after a strong performance during the year, but the furniture retailer remained cautious about the outlook for 2011. In an interim management statement, the company said that the business continued to perform well and has delivered good performance on key measures, particularly during the crucial October trading period. In addition, the group revealed that further ‘legacy’ property agreements have reduced aggregate future costs by in excess of 20 million pounds. Howden shares advanced 10.8p to 90.3p.

Following the UK Government’s recent Comprehensive Spending Review, energy efficiency firm Eaga (EAGA) announced that activity in its Managed Services and Heating & Renewables segments, during both the current and next financial years, will be significantly lower than expected. The company added that it is taking steps to re-shape its operational structure and, as a result, it expects to incur “significant exceptional restructuring related charges.” At this stage the cash element of the restructuring costs could total 20 million pounds and would be incurred during the next 24 months. Eaga shares dropped 6p to 65p.

Business and technology services firm Logica (LOG) returned to growth in the third quarter ended 30th September 2010 with revenue up slightly on last year at 863 million pounds, reflecting strengthened financial services demand across all its markets. While European recovery remained uneven, the group continued to expect modest second half revenue growth and adjusted operating margin for 2010 at a similar level to last year. Commenting on this, chief executive Andy Green said: “Our good order backlog in outsourcing, combined with improving trends in Consulting and Professional Services, positions us well for 2011.” Logica shares slipped 4.2p to 129p.

Small Caps, AIM and PLUS

NetPlay TV (NPT), the interactive gaming company, has raised 2.5 million pounds, through a placing of 83.33 million shares at 3 pence each, to strengthen the group’s balance sheet and to enable the completion of its restructure. What’s more, with a renewed focus on its core “live” casino products, the proceeds will also be used to ensure sufficient funding to return the company to sustainable profitability. NetPlay shares dropped 1.13p to 4.75p.

Ultrasis (ULT), the provider of interactive healthcare and related services, announced a strategic partnership with health services provider Serco Occupational Health that will see Serco use Ultrasis’ GetFit Health Manger programme as an integral part of its corporate wellbeing service. The agreement will also enable the provision of telephone supported Beating the Blues – a computerised cognitive behavioural therapy programme for depression and anxiety – through BMI Healthcare to Serco’s customers. Ultrasis shares gained 0.05p to close at 0.53p.

Sunrise Resources (SRES) has received positive results from metallurgical testwork and colour testing for samples collected from within the old workings at the company’s 100%-owned Derryginagh barite mine in South-West Ireland. The results confirmed that saleable barite concentrate can be produced by low cost gravity processing. Furthermore, the company also announced the results of a programme of geophysical exploration at the mine site which has identified significant additional strike potential well beyond the limits of the existing mine workings. Sunrise shares moved up 0.05p to 1.48p.

Shares in Asterand (ATD) dipped 0.25p to 11p after the human tissue research group reported 30% revenue growth in the three months ending 30th September 2010, with the base tissue business posting 9% growth. The company, which provides human tissue and human tissue-based services to pharmaceutical and biotechnology companies, said revenue in the three month period grew to 5.4 million dollars (3.4 million pounds). Commenting on this, chief executive Martyn Coombs believes that the steps taking throughout the year, such as the new contract with the National Cancer Institute, have set a “sound foundation” for future growth.

Coal of Africa’s (CZA) shares fell 21.5p to 65p after the miner confirmed that it had received a notice from the Mpumalanga Provincial Government, noting its intention to issue a compliance notice in relation to the company’s activities at the Mooiplaats Colliery in South Africa. In light of this, the group announced that, contrary to the media reports, it has “not” been asked to stop activities at the mine, but has 10 days to make an application for rectification.

PLUS-quoted company One Media Publishing* (OMPP) has signed a new music catalogue deal for 6,000 dollars (3,734 pounds). The audio and visual copyright firm has acquired the rights on a royalty sharing basis for the distribution of over 300 tracks of ‘easy listening music’ performed by 25 different artists. The acquisition includes 30 performances by Englebert Humperdink, 24 performances by Dionne Warwick and 17 performances by The Righteous Brothers. One Media shares ended the day unchanged at 2.25p.

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