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Brokers’ Notes

Fox-Davies Capital retained its “BUY” recommendation for EMED Mining* (EMED), with a target price of 62p. The mining company has announced that the classification of the Biley Vrch Mineral Resources has been approved by the Slovakian state commission for classification of mineral resources. Subsequently, the research house has not changed its target price as with in the next week it will be carrying out a review of its commodity and currency assumptions, which it believes will have more significant impact on the EMED due to the weakening of the Euro. The shares edged forward by 0.12p to 8.5p.

Collins Stewart downgraded its recommendation to “SELL” for Connaught (CNT), with a 150p target price. Following the integrated services group’s warning that public spending cuts would hit revenues, the research house downgraded its 2010 and 2011 EPS forecast by 31% and 35%, respectively. There are also potential concerns around lost contracts as social housing intake has remained flat over the last four and a half years at approximately 400 million pounds. Furthermore, given the reduction in forecast EBITA and the recent 5.5 million pound compliance acquisition, net debt forecast have risen from 85 million pounds to 120 million pounds, persuading Collins Stewart to downgrade its recommendation. Connaught shares fell by 80p to 135p.

Panmure Gordon reiterated its “BUY” recommendation for 4imprint (FOUR), with a target price of 257p. The promotional product provider issued a positive update, with sales momentum still strong in the first five months of the years and ahead of the research house’s expectations. Moreover, growth has been recorded across the board in each division, and US operations continue to make good progress with all important prospecting returns showing “a strong increase in response rates”. While growth is better than expected, Panmure Gordon does not anticipate further progress as the year progresses, leaving its estimates unchanged. The shares went down by 10.5p to 210.5p.

Nomura raised its “BUY” recommendation for Lloyds Banking (LLOY), with an 80p target price. According to the Japanese broker, UK banks are benefiting from a combination of declining impairments, rising margins and strengthened capital bases. In addition, Nomura believes that balance sheet restructuring will eliminate double leverage of the capital deployed in the life insurance business by 2012, allowing it to be more highly valued in the group valuation. The broker said that, in the past, UK banking has proved a profitable industry and could be expected to be so again, as long as economic recovery continues. Among the far eastern banks, Nomura cut its HSBC (HSBA) recommendation to “NEUTRAL”, with a reduced target price of 725p. Although far-eastern banks retain defensive attractions, it is cautious ov er a rise in US interest rates. Lloyds shares rose by 1.21p to 55.41p and HSBC shares dropped by 2.8p to 639p.

Blue-Chips

BP (BP) shares went up by 4.7p to 309.3p after it indicated that the costs of cleaning up the Gulf of Mexico oil spill have reached 2.65 billion dollars, up by 300 million dollars since Friday. On a more positive note, the US National Hurricane Centre in Miami said that tropical storm Alex, which has pounded parts of Central America, was likely to strike well away from the area where BP is trying to stop the oil leak. Furthermore, Barack Obama and David Cameron said that the oil giant should “remain a strong and stable company” after meeting to discuss the environmental disaster on the sidelines of the G20 summit in Toronto.

Standard Chartered (STAN) said in a trading update that the bank is tracking towards a “strong performance” in the first half of 2010. According to the bank, economic conditions continue to improve across its geography and business activity levels are increasing, although recent market volatility has had some impact on sentiment. The company said that first half reported income was likely to be flat compared to the same period in 2009, but should show double-digit growth with net interest margins falling slightly. Shore Capital said that this is a “decent” update with trading and trends largely consistent with its expectations; and thereby issuing a “BUY” recommendation. The shares fell back by 32p to 1,710p.

BT (BT.A) shares moved forward by 0.6p to 131.3p after signing a contract with Sky for the wholesale supply of Sky Sports 1 and 2. The contract means the BT customers will be able to view the channels from 1 August, in time for the start of the domestic football season. The pension fund value destroyer is yet to reveal its pricing.

Mid-Caps

Premier Oil (PMO) shares energised, rising by 79p to 1,261p subsequent to the announcement that the Catcher East (28/9-1Z) sidetrack well, located in the UK Central North Sea, has encountered “excellent quality oil bearing sandstones.” The well was drilled to a total depth of 5931 ft Measured Depth (MD) and no oil water contact was encountered. Initial analysis indicates 82ft of net hydrocarbon pay over a gross interval of over 236 ft. Encouraged by this, Evolution Securities estimates the new reserve range adds between 32p and 63p to Premier oil’s shares. Consequently, the research house issued an “ADD” recommendation, with a target price of 1,500p. Shares in Premier’s partners Encore Oil (EO.) and Nautical Petroleum (NPE) also rose by 16.5p to 52p and 32.25p to 171p, respectively, on the back of the news.

UK house builder Taylor Wimpey (TW.) shares fell by 0.94p to 29.52p despite reports that sales have recovered after a lull around the time of the general election. The company said private sales rates for the year to date are broadly flat year-on-year at 0.58 sales per site per week, while its order book is strong. The house builder expects to complete 4,650 homes in the first half at an average selling price of 167,000 pounds. This compares with 4,702 homes at an average selling price of 153,000 in the same period last year. All the same, political uncertainty is leading to caution in the sector as house prices remain under pressure. Shore Capital maintained its “HOLD” recommendation, preferring Berkeley Group (BKG), which it says has a strong balance sheet and a favourable geographical skew in London and the South East.

Rentokil Initial (RTO), provider of business support services, acquired Knightsbridge Guarding Holdings and Perception UK for a total cash consideration of 6.9 million pounds. Both businesses will become part of the company’s Initial Facilities Services division and will enable it to strengthen its position in the UK’s integrated facilities market. The acquired business generated combined revenues of 33.8 million pounds in the last financial year. Rentokil shares edged back by 1p to 114.4p.

Small Caps, AIM and PLUS

Shares in lightning, power and electronics systems firm LPA Group (LPA) fell 3.5p to 26.5p as the market took a dim view of reports that it made a loss for the first half of the year to 1st April 2010. LPA announced loss in profits before tax of 307,000 pounds compared to profits of 79,000 pounds the year before. Revenues more or less remained flat at 6.9 million pounds. This poor performance has been attributed to the widespread delays in customer project delivery schedules; and as a result, interim dividend has been suspended. The result for the year as a whole is expected to be disappointing, according to the Chairman of LPA, Michael Rusch.

Eredene Capital (ERE) shares went up by 2.5p to 20.75p on the back of winning a bid with a consortium to build and operate the container terminal at Ennore port in Tamil Nadu, southern India. The estimated project cost is approximately 207 million pounds and is headed by Spain’s port operator, Grup Maritim. The real estate group has a 22% stake in the consortium and its equity commitment to the project is up to approximately 23 million pounds, spread over a 48 month period. The commitment will initially be funded through existing cash reserves and then through the raising of additional capital into Eredene.

MTI Wireless (MWE), the manufacturer of flat panel antennas, saw its shares climb 2p to 15.5p as investors tuned in to a 0.7 million dollar (0.47 million pounds) order from an existing client for fixed broadband wireless antennas. Chief Executive of MTI, Dov Feiner, added that this order supports MTI’s current sales expectations for 2010 and 2011.

In a trading update Supercart (SC.) has underlined the recent contract wins, including a 400,000 million pound order from an existing North American client. Additionally, two former Rehrig customers have placed orders worth some 70,000 pounds while it has also received its largest single order for 500,000 from a South African client. However the group has confirmed its need for further cash and even though it has had expressions of interest from a major shareholder it continues to seek a mix of debt/equity solution. The shares edged forward by 1p to 5.5p.

Shares in consultancy firm Scott Wilson (SWG) rocketed by 134.5p to 254p after it agreed a recommended cash offer, to be made by Universe Bidco, a wholly owned subsidiary of the engineering consultancy URS. Under the terms of the offer, shareholders will receive 210 pence in cash for each Scott Wilson share, valuing the entire issued and to be issued share capital of Scott Wilson at approximately 161 million pounds. In an increasingly global marketplace, the board believes that a combination with URS will significantly enhance Scott Wilson’s future prospects. However, following the URS announcement US rival CH2M HILL said it was considering making a rival bid. Earlier, Scott Wilson said its full-year pre-tax profit for the year ended 2 May 2010 almost doubled to 18 million pounds, aided by lower cost of sales, but it did not expect any growth in its UK business over the next year.

The house building and construction group Galliford Try (GFRD) shares dropped by 16.25p to 330p after being selected as private sector partner for the development of the 300 million pounds of community facilities across the South East of Scotland over the next 10 years. Additionally, the house building and construction firm announced that its water business, in a joint venture with Imtech, known as GTM, has been awarded a five-year special projects framework worth up to 90 million pounds by Anglian Water. The framework will consist of one-off large schemes during AMP5 – the asset management plan period which runs between 2010 and 2015.