UK MARKET TALK ROUNDUP: SHARES GAINING

23rd Jun 2010 13:23

Stocks on the rise in the UK today. Compiled by Dow Jones Newswires Markets Desk, [email protected] Contact us in London. +44-20-7842-9464 [email protected] 1223 GMT [Dow Jones] The impact of the proposed bank levy on UK banks is likely to be minimal and much more benign than the worst-case scenario some market participants may have been expecting, says Matrix Group. In particular, reckons concerns about Lloyds Banking Group (LLOY.LN) being significantly affected are unwarranted. Matrix's analysis shows the percentage impact on Lloyds' net profit should be in the low-to-mid single digits. Given this greater assurance on the effects of the bank levy, Matrix reiterates its buy rating on Lloyds with a target price of 80p. Does not cover Royal Bank of Scotland (RBS.LN) but notes it potentially incurs the most substantial impact on its net profit among the UK banks, due to the later recovery in its earnings and the very large size of its balance sheet. Lloyds shares +2.6% at 60p. ([email protected]) 0943 GMT [Dow Jones] Kier (KIE.LN) and Costain (COST.LN) are likely to benefit the most from the better than feared outlook for the construction and materials sector, following the UK emergency budget, says Investec. Says the budget signaled no further cuts to the sector and included the formation of a regional growth fund to finance capital projects. Notes Costain has fallen 23% since its '10 peak while Kier has fallen 12%, both largely due to spending fears. Says both businesses have grown outsourcing businesses and other defensive business lines in addition to their public sector activities. Sees a relief rally for both. Rates the two at buy. Costain shares flat at 201.3p, Kier +0.2% at 1020p. ([email protected]) 0932 GMT [Dow Jones] Kesa Electricals' (KESA.LN) FY results are workmanlike, says Hargreaves Lansdown. Notes despite a fall in same store sales, group profit margins have been expanded, with cost cutting and gains in market share underwriting the performance. Adds the group continues to play to its strengths, with zero borrowing and strong cashflows providing for an attractive increase in the dividend payment. On the downside, Hargreaves says management's outlook comments express caution. "On balance, market consensus opinion currently denotes a hold." Shares +4% at 122p. ([email protected]) 0924 GMT [Dow Jones] Kesa's (KESA.LN) preliminary results are ahead of expectations, says Investec. Says the full-year dividend is increased, surprisingly, to 5.9p and year-end net cash improves considerably. Is disappointed by the apparent lack of a new strategic road map, with the company merely measuring progress against the key areas it had highlighted previously. Meanwhile, thinks the change to its reporting currency to euros from sterling is sensible, given the weighting of revenues and profits generated in euros. Places hold recommendation and 110p price target under review. Shares +4.3% at 122p. ([email protected]) 0816 GMT [Dow Jones] UBS raises Hikma Pharmaceuticals (HIK.LN) price target to 770p from 715p to adjust for current FX rates and a slightly higher interest charge than previously anticipated. Notes Hikma has launched oncology injectable products in the Middle East and North Africa, and says this is a significant opportunity, given lower Injectable generic penetration. Adds the company continues to roll out Injectables in Europe, where the underlying business remains stable. Keeps the stock at buy. Shares +0.1% at 692p. ([email protected]) 0756 GMT [Dow Jones] Credit Suisse initiates coverage of Cable & Wireless Worldwide (CW.LN) at outperform with 120p price target. The company is expected to deliver strong earnings and free cashflow growth in the coming years. Credit Suisse says that will be driven by an improving revenue mix, ongoing market share growth and a more benign competitive environment. CS also thinks economic headwinds are reducing and should soon reverse. It adds that UK government spending cuts remain the main risk, but it notes the public sector accounts for just 12% of revenue in '10/'11. The stock looks good value given CS's EPS growth outlook. Shares +0.9% at 92p. ([email protected]) 0750 GMT [Dow Jones] Bank of America Merrill Lynch raises Kesa Electricals (KESA.LN) price target to 135p from 130p following the company's FY'10 results. BofA says all profit and loss lines beat the brokerage's and consensus forecasts. It raises FY'11 EPS estimate to 12.50p from 11.59p and FY'12 EPS estimate to 15.44p from 14.31p to reflect the better profitability across Kesa's European businesses and a lower tax rate going forward. It says Kesa trades in line with the UK general retail sector, but the EPS growth of 27% BofA expects for FY'11 means the stock looks relatively cheap. BofA awaits the strategy update. Neutral rating. Shares +3.5% at 122p. ([email protected]) Contact us in London. +44-20-7842-9288 [email protected] (END) Dow Jones Newswires June 23, 2010 08:23 ET (12:23 GMT)