Market Report: TeleCity's Russian aims fail to impress

Laura Chesters
Tuesday 06 November 2012 01:00 GMT
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Finland is best-known for its forests, Nokia and the Moomins, not data centres. But TeleCity has been busy snapping up Finnish data centre operators. Earlier this year it bought Tenue for £3.7m, yesterday it was €28m (£22m) for Academica.

The company thinks entering Finland means it can get a foothold in the lucrative Russian market, where growing internet traffic means companies will need more data centres. But the City thought the Academica buy looked pricey, and TeleCity's shares programmed in a 78p loss to 835p, taking them to the bottom of the mid-cap index. TeleCity also said its full-year earnings are expected to be in line with City forecasts.

Investec scribe James Goodman retained his Hold rating and price target of 750p but said: "We understand depreciation for next year is likely to be higher than we (and we believe the market) have previously forecast. We lower our profit before tax estimate by 6 per cent, and earnings per share falls by 3 per cent." Analysts at Liberum Capital issued a Sell rating.

On AIM, retail-investor favourite Leni Gas & Oil said it has sold its assets in the Gulf of Mexico. As part of the sale, its "strategic alliance agreement" with Byron Energy, entered into in 2009, has ended. The $1.6m (£998,000) sale will for now help reduce the need to raise equity or seek new debt. The company also said it will be able to step up development of its Trinidad portfolio, the Goudron Field. Leni spurted up 0.15p to 1.24p.

Its executive chairman, serial entrepreneur David Lenigas, is busy with Africa's answer to easyJet. FastJet, spun out of Lonrho, will unveil details of its fares and services next week ahead of its first flight.

Weir Group shot to the top of the FTSE 100 leaderboard, but not thanks to any stellar news. In an environment where flat is the new up, merely saying "we're OK" will catch a trader's eye. The market was just glad it wasn't bad news and the shares managed an 80p rise to 1,831p despite the Glasgow engineering group saying sales and profit growth had "moderated". It was a weak third-quarter update but in line with expectations, and the company remains on track for full-year profit of between £440m and £450m.

Numis Securities rated it a buy with a target price of 2,300p, and analyst Scott Cagehin said: "The medium to long-term outlook remains positive. Shares are trading … at a modest discount to the sector. We believe it should trade better, given its acquisition cushion and clear growth opportunities."

The US presidential election remains the primary focus this week but news that the UK's October manufacturers purchasing managers' index had fallen more than forecast and new concerns on the eurozone crisis kept the blue-chip index down 29.49 points at 5839.06.

The last of the banking updates this quarter came in from HSBC. It said it will be paying more in fines to US regulators and for PPI mis-selling, and its shares lost 8.1p to 618p.

The City will be scrutinising comments today from Marc Bolland, the chief executive of Marks & Spencer, for any signs of an uptick in high street spending ahead of the crucial Christmas trading period. The City has forecast that the retail bell-wether will post a 4 per cent decline in profits to £680m this year, so Mr Bolland remains a man under pressure. M&S shares edged down 3.5p to 387.9p ahead of the results, but the price has been gaining ground in the past quarter, and is up 22 per cent from the beginning of this year.

Pharmaceuticals giant Glaxo-SmithKline beat the index and was in positive territory, up 22.5p to 1,384p.

Back to the mid-cap index, for St James's Place. The wealth manager was in focus after weekend reports that Lloyds Banking Group plans to sell its 60 per cent stake to raise £1bn and boost capital. The sale has long been rumoured but shares in St James's fell 3.6p to 394.9p.

Better news for investors in the Egyptian gold miner Centamin. An update from the company said the Egyptian administrative court has decided its Sukari mining licence is valid, and there was a gold rush back in to its shares.

They had lost 40 per cent last Tuesday after reports claimed Centamin could lose its concession agreement at its flagship mine. But yesterday the shares glistened at the top of the mid cap index, up 14.05p to 74.55p.

FTSE 100 Risers

Morrisons 265.7p (up 1.9p, 0.72 per cent) The Northern-based supermarket chain checked in toward the top of the index ahead of its third-quarter trading update on Thursday, despite a target price cut from analysts at Investec.

British American Tobacco 3,128p (up 30.5p, 0.98 per cent) Investors favoured defensive stocks yesterday as eurozone crisis fears were raised again.

FTSE 100 Fallers

Vedanta Resources 1,118p (down 42p, 3.62 per cent) Copper prices have hit a two-month low this week and miner Vedanta was sent toward the bottom of the index.

Eurasian Natural Resources Corporation 321.3p (down 12.2p, 3.66 per cent) Miners were out of favour as investors preferred more defensive stocks and ENRC collected the wooden spoon on the benchmark index.

FTSE 250 Risers

SDL 539p (up 19p, 3.65 per cent) Canaccord Genuity upgraded the translation software company's shares from hold to buy and the company announced its chief executive has left and the chairman will step in on an interim basis.

Stobart Group 113.6p (up 5.6p, 5.19 per cent) Rumours that the transport group is planning to raise money via a retail bond accompanied a share price rise yesterday.

FTSE 250 Fallers

Dixons Retail 24.91p (down 0.93p, 3.599 per cent) The electrical retailer fell back after its shares were risers last week as rival Comet went in to administration.

Talvivaara 129.7p (down 5.7p, 4.21 per cent) The Finnish miner's shares were down after it said it had to temporarily close down metals production after a leak was discovered in the gypsum pond at its mine. It will restart the recovery plant tomorrow.

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