Free Stock Tips

Brokers’ Notes

GE&CR re-iterated its “buy” recommendation for the multinational specialist staffing group Empresaria* (EMR) with a 78p target price. The staffing firm recently reported that positive trading has continued into the third quarter and that full year results are expected to be above current market expectations. The research house’s forecasts have been at the upper end of expectations but nonetheless GE&CR believes there is scope to increase both 2010 pre-tax profit and earnings per share forecast by 5% to 6.2 million pounds and by 1.6% to 6.3p, respectively. The impressive first half performance increases the research house’s confidence in the company’s robustness and it continue to value the company at 11 times 2011 earnings. Empresaria shares climbed 1.5p to 60.5p.

Charles Stanley Securities initiated coverage for the health management services firm Synergy Health (SYR) with a “buy” recommendation and 848p target price. The healthcare group has a solid track record with a proven business model. The decontamination and sterilisation services that will underpin the medium term growth have a higher value-add than the original linen management and benefit from greater competitive barriers. The specialist systems and expertise that determine commercial success have been honed in the UK and are now being rolled out internationally not only into the rest of Europe but, importantly, into Asia. The majority of these non-core functions are still being performed in-house, yet the regulatory and economic background is increasingly conducive to out-sourcing, with Synergy Healt h well placed to capture much of this work. The shares finished 5p higher at 700p.

Evolution Securities issued a “buy” recommendation and 265p target price for Nautical Petroleum (NPE) after the oil and gas producer announced the results of the Kraken appraisal well located in the UK North Sea. The broker believes the successful appraisal well 9/2b-4 has more than validated the Nautical field model for Kraken with better reservoir development and a deeper oil-down-to (ODT) level. Evolution expects the firm to move forward in the development of the Kraken field, with phase I Flame Photometric Detector (FPD) approval in 2011 and first oil in 2012/13. Together with the Catcher discovery earlier this year, the group now has serious North Sea development projects and interesting exploration upside, the broker concluded. Nautical shares jumped 10.25p to 192.25p.

Arden Partners maintained its “buy” recommendation for the precision engineer Renishaw (RSW), with an increased target price of 1,200p, following the recent trading update. The positive update revealed revenue in July and August has been approximately 20 million pounds per month which follows a very strong fourth quarter in 2010 when the firm achieved revenues of 60.5 million pounds. The broker believes the firm offers deep value given world leading market positions built on patented technology. It also thinks recent developments in dental and other healthcare product markets are “in for nothing” at the current price and provide for growth again beyond China and cyclical recovery. However, Arden added, the key sensitivity for the business is sustainability of strong demand from China and the Far East. Renishaw shares slipped 54p to 950p.

Blue-Chips

Workers at BAE Systems (BA.) were said to be in “shock” after the defence giant unveiled plans to cut hundreds of jobs. Unions said almost 1,000 jobs at five military factories and other sites would be lost in the latest cull, warning that the cuts could be the “tip of the iceberg”. Meetings will be held at the affected sites next week but union officials warned that the defence industry faces an uncertain future, with a strategic review looming and the Government poised to announce spending cuts. Kevin Taylor, managing director of BAE’s Military Air Solutions division, said job losses were likely in manufacturing, engineering and associated support functions. BAE shares climbed 3.8p on the news to 322.9p.

Mid-Caps

Morgan Sindall (MGNS), the construction group, has acquired the bulk of Connaught’s (CNT) social housing maintenance operations for 28 million pounds in a move that will help secure the future of about 2,500 workers across Britain. The new contracts are expected to generate approximately 200 million pounds of additional annual revenue, split broadly between response maintenance contracts and Decent Homes, planned maintenance contracts. Despite the speedy resolution for a large part of Connaught’s troublesome division, people familiar with the matter said that redundancies were still likely and the future of the business not acquired by Morgan Sindall remained uncertain. Morgan Sindall shares rallied 47p to 708.5p.

Hochschild Mining (HOC) shares rallied 12.2p to 390.5p after the Latin American precious metals miner announced that the resources at its Inmaculada project in Peru have more than tripled. The company, which owns 30% of the project, said its partner International Minerals Corporation, completed a new resource report for the deposit that shows it contains 532,000 ounces of gold and 15.8 million ounces of silver. This represents an increase of 245% in gold ounces and 225% in silver ounces, in the measured and indicated categories. A preliminary study of the economics of the planned mine shows a pre-tax internal rate of return of 41% and initial capital of 168 million dollars (109 million pounds).

British pubs company JD Wetherspoon (JDW) reported a 7.1% increase in full year pre-tax profits, in line with forecast, as it benefited from opening two hours earlier to sell breakfasts. For the year ended 25th July 2010, pre-tax profit stood at 71 million pounds on revenue of 996.3 million pounds, up by 4.3% a year earlier. The company, which earlier this month announced plans to create 1,000 new jobs for 16 and 17 year old school leavers, said it is now selling over 400,000 breakfasts and 600,000 coffees each week, an increase of 40%, having started opening its pubs at 07:00 in April. Weatherspoon shares slipped 21p to 422.5p.

Petropavlovsk (POG), Russia’s third-largest gold producer, plans to proceed with an initial public offering of its iron-ore division in Hong Kong as it seeks to increase the value of assets purchased last year. The company expects the unit, reorganized under new subsidiary IRC, to become a listed entity on the Hong Kong exchange in October, raising about 500 million dollars (325 million pounds). The decision to list in Hong Kong reflects the location of IRC’s asset portfolio as well as proximity to target customers, equipment suppliers and sources of capital, the group said in a statement. Petropavlovsk shares finished 5p higher at 1,160p.

Small Caps, AIM and PLUS

Imaginatik (IMTK) shares surged 0.375p to 2.125p on news the idea management software provider is participating on a pilot project with the National Aeronautics and Space Administration (NASA), the US government agency responsible for aeronautics and aerospace research. Under the terms of the agreement, NASA will employ the Imaginatik’s Idea Central software to help develop innovative ideas and collaborative teams to solve key technical challenges. In addition, Imaginatik will provide a comprehensive set of professional services to assist NASA in project planning, software configuration and implementation, and assessment of results.

Central African Gold (CAN) shares climbed 0.03p to 0.85p following the mining company resuming gold production at both the Oil Nic and the Dalny mines in Zimbabwe, which were previously on a care and maintenance programme. Since production resumed on the 2nd August, the Old Nic mine and the Dalny mine have produced 110 and 124 ounces of gold, respectively. The board added that he Dalny asset is currently under-explored and offers a “substantial medium to long-term development opportunity.”

Edenville Energy (EDL), the African coal exploration company, commenced field work on the Rukwa Coalfield in Southern Tanzania as it intends to have a maiden resource estimate for an open pit coal mine in 2011. The Rukwa Coalfields are ideally positioned, falling within the Tanzania Government’s Mtwara Development Corridor project, which seeks to develop the coalfields and construct thermal power stations in the region. Commenting on this, chairman Simon Rollason said: “Our strategy remains to efficiently prove up resource projects that can easily be put into production and provide rapid value to our shareholders.” The shares rose 0.125p to 0.9p.

Arden Partners (ARDN) shares slumped 12.5p to 45p after the brokerage house announced that it was “unlikely to meet market expectations” for the year ending 31st October 2010 on the back of a “challenging” equity trading environment. The firm added that the corporate finance pipeline remains satisfactory although the timing of transactions is uncertain. In recent months, the group revealed, it has taken action to reduce headcount and overhead expenses and this has resulted in “exceptional termination costs.”

British fashion and home ware retailer Laura Ashley (ALY) posted a 10-fold jump in first-half profit as demand picked up across its businesses, sending its shares soaring 3p to 15.75p. For the 6-months to 31st July 2010, pre-tax profit, including exceptional items, rose to 10.5 million pounds as revenue grew by 5.7% to 135.1 million pounds. The exceptional gain of 4.8 million pounds primarily relates to the sale and leaseback of its Bardon warehouse. In spite of this strong performance, the firm added that it remained cautions for the remainder of the year as consumer environment continued to be uncertain.

Vertu Motors (VTU), the motor dealer, has acquired a Peugeot business in Dunfermlin from Hardie Motor Group for approximately 300,000 pounds. The acquisition is the eighth Peugeot dealership to be added to the firm’s portfolio and will bring the total number of sales outlets in operation to 69.  “This new Peugeot dealership is excellently located, and adds to our brand’s presence in Scotland following our purchase of Paisley Peugeot in April,” commented chief executive Robert Forrester. The board anticipates that the acquisition will be earnings s enhancing in the first full year of ownership. Vertu shares finished flat at 26.25p.

PowerFilm (PFLM), the developer and manufacturer of thin flexible solar panels, has been awarded 2.68 million dollars (1.73 million pounds) funding by the US Army for further development of a “Self Powered Flexible Display.” This funding will support the third year of the development program, which includes development of techniques for pixel defect reduction and fabrication of prototype devices. After the third year the focus will be on funding fabricating, and installing the pilot manufacturing line for the flexible display components, the firm added. PowerFilm shares finished flat at 27.5p.

The Week Ahead

We expect a busy week on the news-flow front from the small caps next week. Property investor Town Centre Securities (TCSC) and business information dissemination company Centaur Media (CAU) are due release final result next week with Queen’s Walk Investment (QWIL) set to update the market on Friday. On the Wednesday investors will be looking for a positive update from house-builder Galliford Try (GFRD) who has been hit pretty hard by the financial crises and the recession. This year is expected to be the bottom of the dip for the firm and a 3.5% dividend is being anticipated.

Amongst the mid-caps, defence group Chemring (CHG) will be updating the market on trading on Thursday, with shares expected to carry-on rising following its recent acquisition of ammunition manufacturer Mecar. What investors will be looking for however is how the steps to cut government borrowing such as higher taxes and public spending cuts, will hit consumer demand at home-ware retailer Dunelm Group (DNLM), fashion retailer SuperGroup (SGP) and electrical goods retailer Kesa Electricals (KESA). Another mid-cap firm reporting next week is fund manager BlueBay Asset Management (BBAY), share in which have recovered from a poor trading update in July and are still on the rise.

Amongst the blue-chips we look forward to interims from retailers Kingfisher (KGF) and Next (NXT) and a trading update from food processing firm Associated British Foods (ABF), shares in which have been moving up amid rumours that it was mulling a demerger of its Primark division.