Free Stock Tips

Brokers’ Notes

Evolution Securities downgraded its recommendation for Avocet Mining* (AVM) from “add” to “sell” and, consequently, decreased its target price from 130p to 105p. The broker believes that the Inata mine in Burkina Faso was a good buy for the company and that there is considerable exploration potential both around Inata and in some of the group’s other licences in West Africa. However, it feels that operational performances in South East Asia is going from bad to worse, and that these two mines – Penjom and North Lanut – are undoing the good work at Inata. Avocet’s profit margin would undoubtedly increase if it sold the mines, but is it ever acceptable to reduce production by almost half? The shares slipped 2.25p to 124.5p.

Arbuthnot reiterated its “neutral” recommendation for EasyJet (EZJ), with a reduced target price from 480p to 450p. Commenting on the airliner’s third quarter update, the broker believes that the unchanged financial year guidance of pre-tax profits in the range of 100-150 million pounds “masked several problems.” The results showed stronger revenues offsetting higher costs, as greater operational problems necessitated extra spending to mitigate the impact on passengers. It thinks that the group’s business model appears to be “more” vulnerable to operational disruption while improving its robustness may lead to higher costs. Arbuthnot added that in the short term, despite an encouraging demand environment, it remains cautious. EasyJet shares descended 7.6p to 396p.

Edison investment research initiated coverage of Arian Silver (AGQ), a specialist in exploration and development of epithermal silver deposits in Mexico. It is currently focused on the imminent start of contract mining at its 100% owned San Jose mine in Zacatecas. The group’s business plan is to use near-term revenues from San Jose to fund the exploration on the remaining 90% in the known strike of the San Jose vein. The research house’s valuation of the company indicates that its four and a half year mining plan at San Jose is worth 14.96p per share and that reinvesting the resulting cash-flows should define a resource reasonably valued at 47p per share, but potentially as high as 140p per share. Arian shares jumped 1.25p to 8.375p.

Collins Stewart reiterated its “buy” recommendation for Invensys (ISYS), the automation, control and process solutions group, with a 305p target price. The broker commented that even though the company’s interim management statement was lacking in detail, it was pleased to see that its guidance for “improved performance” remained unchanged. The key focus for the firm recently, according to Collins, has been the Rail division. Following the Ministry of Public Works’ announcement, Invensys expects all of its high speed projects to continue as planned, while urban projects could be delayed by one to four years. Given that this supports the broker’s view, the longer term picture in Spain remains attractive. The shares fell 7.5p to 271.6p.

Blue-Chips

AstraZeneca (AZN) doubled its 2010 share buyback programme, after posting strong results and winning an endorsement from a U.S. advisory panel for its potential blockbuster heart drug Brilinta. The drug, with expected annual sales of more than a billion dollars, is vital for future growth at the firm, which faces falling sales of older drugs due to patent expirations. Core pre-tax profit, excluding certain restructuring costs and charges, rose 5% in the quarter to 3.53 billion dollars (2.27 billion pounds), equivalent to earnings per share of 1.79 dollars (1.15 pounds), on sales up 3% at 8.18 billion dollars (5.25 billion pounds). On the back of the numbers, the company raised its prediction for 2010 core earnings per share by 30% to the range of 6.35-6.65 dollars (4.07-4.27 pounds). “Driven by the lack of sustainable core”, Evolution Securities retained its “sell” recommendation, believing that “Brilinta alone is not sufficient to change this.” AstraZeneca shares climbed 86.5p to 3,289p.

Reed Elsevier (REL) shares advanced 20p to 552p subsequent to the professional publisher delivering improved trading performance in the first half of the year, with revenues ahead by 1%, excluding portfolio changes, against a 7% decline in the first half of last year. This reflects, in particular, a significant moderation in the rate of decline in advertising and promotion markets, which appear to be stabilising. The subscription nature of much of its revenues, whilst providing considerable resilience in the recent downturn, means that growth will lag improvements in economic conditions. The company, however, is confident that the good progress that management is making on individual business priorities will deliver further improvements in performance. Reed Elsevier’s financial position remains strong with good cash generation and capital discipline.

Rolls-Royce (RR.) delivered a robust performance, posting an underlying first-half pre-tax profit of 465 million pounds, up 4.5% a year ago. The engine maker is currently tipped to report a pre-tax profit of around 912 million pounds for 2010 as a whole. This growth in profit reflects increased revenues of 5% to 5.4 billion pounds. Underlying revenues improved by 7%, with good growth in service revenues from all businesses and an especially strong performance from original equipment sales in the Energy business. It expects underlying revenues to grow by close to 10% for the year as a whole. Shares in the company finished 2p lower at 585.5p.

Mid-Caps

Connaught (CNT) shares rallied 4.52p to 35.52p after the facilities management group secured additional funding. The company announced that it has agreed with its lenders the terms of an additional 15 million pounds, short term overdraft facility, together with deferral of interest and principal payments due on its existing facilities in July and August. This facility will be in addition to its current facilities of 200.6 million pounds.

Laird (LRD) shares jumped 10.3p to 120p as the company said the majority of its electronics and security systems markets continue to show a recovery from the depressed conditions of 2009. In the six months to 30th June 2010, the company reported increased revenues by 3% to 274.6 million pounds. Consequently, underlying profit before tax, from continuing operations, was 15.1 million pounds, up from 7.6 million pounds in the same period in 2009, driven by particularly strong results from its Performance Materials and Wireless Systems Divisions. The Handset Products Division, however, declined, with its mechanisms product line moving into loss. The firm added that the fundamentals of its markets remain attractive, and its financial position is strong. After reporting 15.1 million pounds adjusted pre-tax p rofit in the first half, Arbuthnot expects “Laird to struggle to meet consensus expectations for over 40 million pounds profit in the full year.”

Environmental consultancy firm RPS (RPS) posted a 20% fall in pre-tax profits to 23.4 million pounds, despite the company reporting a 2% increase in revenues to 226 million pounds in the first half of the year. These results were achieved after absorbing costs of 1.9 million pounds which were incurred in the reorganisation of parts of the group’s business in response to the continuing uncertain economic conditions, as well as the integration of Conics and consolidation of a number of offices in Perth. Nevertheless, the board continues to hold the view that a modest improvement in the second half is achievable. Shares in the firm rose 3.4p to 196p.

Small Caps, AIM and PLUS

Globus Maritime (GLBS) shares buoyed to 565p as the dry bulk vessels operator announced that the 1-for-4 reverse stock split will take effect at the opening of trading on the 29th July 2010, with the company’s issued share capital being 7 million shares. The company also announced that all the special resolutions relating to the possible listing of the company’s shares on a U.S. Stock Exchange was improved. Were the company to achieve such a listing, it would seek to delist its shares from AIM as soon as reasonably practicable so as to avoid the unnecessary expense of maintaining dual listings, the firm added.

Plantic (PLNT) shares soared 2.625p to 7.5p after the bio-plastics innovator announced that it has entered into a Merger Implementation Agreement with Gordon Merchant. Through a Scheme of Arrangement, it is proposed that Gordon will acquire all of the shares in Plantic. Under the terms of the Scheme, Plantic shareholders will receive 8 pence in cash per ordinary share, valuing the entire issued share capital of Plantic at 6.38 million pounds.

British newspaper publisher Trinity Mirror (TNI) reported a leap in first-half profits driven by cost cuts and helped by improving advertising trends, beating market expectations and lifting its shares 24.25p to 100p. The publisher of the popular daily Mirror tabloid said national advertising revenue picked up by 2.2% to 65.8 million pounds, in the first half, but advertising at its regional newspapers fell 8% to 95.7 million pounds as recruitment and property sales remained weak. Total revenue was flat at 382.2 million pounds. It raised its 2010 cost-savings target to 25 million pounds from 20 million pounds and said it had achieved 15 million pounds of this in the first half. The company is cutting about 200 jobs at its newspapers.

Anglesey Mining (AYM) shares jumped 3.5p to 27.75p on news its 41% owned associate company, Labrador Iron Mines Holdings, received Certificates of Approval for the construction of its mining facilities from the Government of Newfoundland and Labrador. The approvals provide for the construction of open pit mining and treatment facilities at a number of deposits.

TXO (TXO), an East Texas based independent oil and gas exploration and production company, announced that oil production for the three months to 30th June 2010 was 5,368 barrels, up 3.3% on the previous quarter. This is the third consecutive quarterly rise in production. At the end of the period the company had 46 wells online, compared to 52 wells at the end of March 2010. The shares finished flat at 1.125p.

Angle (AGL) shares dropped 3.5p to 25.75p, despite the ventures and management services company producing an improved portfolio position and maintaining profitability in its UK Management Services business. In its full year results, the company reported a total comprehensive income of 0.3 million pounds, compared to a 3.6 million pounds loss made in 2009. As a result, loss before tax was reduced to 0.2 million pounds as opposed to the 2.3 million pounds loss made in 2009. Commenting on the performance, the group said that it is not fully clear how U.K government policy decisions will impact the company.

Argos Resources (ARG), the oil & gas exploration company with assets in the North Falkland Basin, announced that its entire issued share capital, comprising over 200 million shares of 2p each, has been admitted to trading on the AIM market. This comes a day after the company announced the conditional placing of 71 million shares to raise 22 million pounds. The net proceeds will be used principally to finance a 3D seismic programme. Based on the placing price, the market capitalisation of the group immediately following admission will be approximately 67.0 million pounds. Argos shares finished 46.75p lower at 33.25p.