UK MARKET TALK ROUNDUP: SHARES LOSING

10th Jun 2010 14:41

Stocks on the fall in the UK today. Compiled by Dow Jones Newswires Markets Desk, [email protected] Contact us in London. +44-20-7842-9464 [email protected] 1341 GMT [Dow Jones] Societe Generale downgrades Home Retail Group (HOME.LN) to hold from buy and cuts target price to 226p from 332p following a disappointing 1Q performance from Argos. Says like-for-like sales were down 8.1% versus the brokerage's expectations for a 3.5% decline. Notes the poor sales at Argos were blamed on the continuing weakness in the video games segment and underperformance in the important TV market. "A big concern is the apparent loss of market share in key categories, such as TVs. In our view the latter may reflect the UK recovery underway at the consumer electronics market leader, DSG International (DSGI.LN), which will gather momentum through '10/'11." Shares -5.3% at 225p. ([email protected]) 1226 GMT [Dow Jones] S&P Equity Research downgrades BP (BP.LN) to hold from buy and cuts target price to 660p from 710p. Cites uncertainties arising from the Gulf of Mexico oil spill, political sensitivities regarding the '10 dividend, the costs of the clean up and upcoming civil charges and potential U.S. government resolutions. S&P says its estimates currently assume it could take six months to control the well, resulting in costs to BP of around GBP6Bln. Still, reckons the share price fall is overdone, and believes BP's strong cash generation and other upcoming projects can cover the costs. Shares -6.3% at 367p. ([email protected]) 1059 GMT [Dow Jones] Others with a bearish BP (BP) outlook post-Gulf predict the company will cut its dividend, exit public markets or worse. Over at Standard Chartered, analysts are mooting the idea of PetroChina (0857.HK) buying BP outright, a proposition the firm says brings "persuasive economics." The firm acknowledges the chances of such a merger look slim now. But it would offer shareholders an "attractive exit opportunity" amid the Gulf spill turmoil, and a buyout "would transform PetroChina from a low-growth company to China's global oil champion" and be accretive to EPS. The economics, the firm judges, are such that "an offer would be supported by interested parties." BP -3% at 379p. ([email protected]) 0829 GMT [Dow Jones] BP (BP) is likely to halve its 2010 dividend to 28 cents per share, says Evolution Securities analyst Richard Griffith. This would drop BP's yield to 4.8%, below its peer group average of 6.3%, he says. "Whether BP would seek to pay these dividends at a later date by doubling up the 2Q 2011 and 3Q 2011 payment's for example, or adopt a new dividend policy next is anyone's guess right now," he says. Evolution expects BP's dividend to be 56 cents per share in 2011 and 59 cents per share in 2012, 5.1% and 6.3% below its previous estimates respectively. Gives buy rating, 580p target. Shares -6.1% at 368p.([email protected]) 0827 GMT [Dow Jones] BP (BP) 5-yr CDS are widening sharply, and were last seen at 570 bps, according to Markit, 195 bps wider than the closing levels Wednesday. The curve is also steeply inverted, says Markit, with the 1-yr CDS quoted at 800-900 bps. This is trading equivalent to junk credit, Markit adds. Shares -6% at 368p. ([email protected]) 0804 GMT [Dow Jones] Deutsche Bank initiates coverage of Essar Energy (ESSR.LN) at buy with 520p price target. Says it is a unique London-listed vehicle for its exposure to India's power and energy markets. Says the company's ambitious but well-defined expansion plans leave it well positioned to capitalize on the strong economic growth anticipated for the Indian economy into the medium term and also India's need for additional power generation and the supply of natural gas. Shares are -0.7% at 446p. ([email protected]) 0717 GMT [Dow Jones] Citigroup cuts BP (BP) target to 590p from 730p, while adjusting its risk rating to high from medium, after a fresh assessment of BP's valuation given the destruction of up to $40B of shareholder value from the Macondo spill. Still, keeps a buy rating on the balance of risk/reward, saying BP remains financially robust. Says its dividend has become a political issue, but says financially there is no reason why BP can't accommodate both dividend payments and comfortably respond to its Gulf of Mexico obligations. Says long term BP is undervalued, and the market is now discounting the worst case rather than the most likely outcome. However, near term BP will continue to be buffeted by negative speculation. Shares -8.6% at 358p. ([email protected]) Contact us in London. +44-20-7842-9288 [email protected] (END) Dow Jones Newswires June 10, 2010 09:41 ET (13:41 GMT)