Thursday’s Stock Market report featuring Barclays, Gulf Keystone, BT, Afren and IQE

The Markets

The US economy grew at an annualised rate of 3.5% in the 3rd quarter according to fresh data from the Commerce Department. This exceeds the consensus view of economic forecasters who had predicted GDP to rise by 3% during the period. The USA was boosted by a significant improvement in new exports and increased government spending, whilst unemployment has also continued to fall. The Federal Reserve viewed these positive economic developments as sufficient cause to announce the end of its stimulus scheme yesterday evening. Ben Brettell, Senior Economist at Hargreaves Lansdown stockbrokers, said that “today’s number represents a return to a healthy-looking trend. The most recent IMF forecasts suggest the US economy will grow 3.1% next year and 3.0% in 2016, and these could be revised further upwards in the coming months”.

Spain also looks to be settling into a pattern of forward momentum as the country posted it’s fifth consecutive quarter of growth. GDP rose by 0.5% between July and September, slightly slower the preceding three months but the year-on-year rate of 1.6% is the highest annual rate the country has seen since 2008. Spain is not yet out of the woods, with unemployment still above 24% and credit remains limited, but Martin van Vliet, an Economist from ING, said that “the nature of Spain’s economic recovery has clearly changed in recent quarters. For a long time, net exports were the only source of growth, but now that financial conditions have sharply improved and the labour market is turning around, domestic demand is taking over the growth baton”.

At the London close the Dow Jones had increased by 157.31 points to 17,131.62 and the Nasdaq had shrunk by 1.64 points to 4,088.91.

In London the FTSE 100 closed up by 9.68 points at 6,463.55 and the FTSE 250 rose by 64.18 points to 15,298.32. The FTSE All-Share increased by 6.39 points to 3,458.91 while the FTSE AIM Index shrank by 0.61 points to 714.58.

Broker Notes

Insurer and asset manager Aviva (AV) has been rated as a “sell” by Shore Capital with a target price of 517p despite positive news in its interim management statement today. Aviva is continuing to make progress in cash generation and has experienced good new business growth in the European market during 2014 to date. However, the broker has a negative stance as it believes the pace of growth will disappoint more bullish investors. Aviva also continues to trade at a premium relative to Shore’s valuation. The shares rose by 1p to 518p.

Westhouse Securities remains “neutral” on private investor favourite Gulf Keystone Petroleum (GKP) despite the firm’s announcement that its development plan for the Akri-Bijeel development plan has been approved. The broker had already priced this development into its analysis, but says that it remains a positive for the Gulf Keystone investment case. Gulf Keystone also said it is in constructive discussions with the Government of Kurdistan, which triggered a rise in the share price yesterday. The shares grew by 2p to 65.75p.

Mine operator Diamondcorp (DCP) has a “hold” rating from Northland Capital after the company announced that development was proceeding on schedule at the firm’s Lace facility in South Africa despite strike action. The Association of Mineworkers and Construction Union is continuing to strike and the schedule may slip if this persists, but underground construction and drilling works remain on track. The broker supports Diamondcorp’s current hard stance on the union’s demand for additional, paid shop stewards. The shares dropped by 0.25p to 6.75p.

Mining strikes mean broker on fence over prospects

Blue Chips.

Banking giant Barclays (BARC) increased its statutory pre-tax profits for the nine months ended 30th September by 31% to 3.7 billion pounds despite a 5% drop in revenues from the same period of the prior year as operating expenses and credit impairments were significantly reduced. Non-core business assets performed better than in the prior period, with losses falling by 33% to 648 million pounds. However, Barclays provisioned another 170 million pounds for PPI compensation payments, along with 500 million pounds for ongoing investigations into potential currency market manipulation. The shares rose by 2.05p to 222.55p.

Oil & gas operator Royal Dutch Shell (RDSA) beat forecasts in the third quarter, with quarterly core earnings up by 31% to $5.8 billion (3.63 billion pounds) over the same period of 2013. Profits fell from those in the prior three months due to a drop in production and declining oil prices, but management has reiterated its commitment to cost management and targeted developments. Shell also increased its third quarter dividend by 4% to 47 cents per share. The shares dropped by 8p to 2,227.5p.

Telecoms operator BT (BT.) increased pre-tax profits by 13% to 690 million pounds in the second quarter as its BT Sport division benefited from the firm’s costly acquisition of Premier League broadcasting rights. Overall revenues were down by 2% as highly volatile transit income was substantially lower than in the comparable period. Management increased the interim dividend by 15% to 3.9p. The shares fell by 7.6p to 367.9p.

Broadband cable and football rights lays groundwork for BT profit growth



Perhaps the UK’s most respected chartist provides a concise introduction to technical analysis and how it can help you in your trading.


Mid Caps

Oil & gas exploration and production firm Afren (AFR) is considering re-stating its historic accounts after the recent revelation and independent review of unauthorised payments. Production at the firm’s wells was 35.5% lower in the 3rd quarter than it was in the same period of last year, with Afren outputting an average of 31,147 barrels of oil per day. Following the departure of compromised management and staff, the firm is focusing on improving operational performance and developing promising new assets. The shares fell by 14.55p to 78.7p.

Mineral extraction company Kazakhmys (KAZ) said plans to split off less profitable assets were proceeding well and should be completed soon. The plans to hive off elements of the business have received regulatory approval and were approved by shareholders in August. Rising production costs and falling ore grades at some existing sites have lead to falling output in certain product categories over the last quarter, but overall levels of ore extraction were flat. The shares dropped by 4.2p to 222.8p.

Transport operator National Express (NEX) has won and renewed a number of major Middle Eastern and European contracts since 31st July. Also boosted by performance and cost improvements, profits before taxation for the third quarter were 15% higher than last year. Management remain confident that the firm is on track to meet full year targets and has announced new investment plans, including the purchase of 250 buses for the UK market. The shares rose by 11p to 246.2p.

National Express picks up new passenger contracts

Small Caps

Revenues at computer hardware supplier Northamber (NAR) fell by 18.9% to 62 million pounds for the year ended 30th June as the firm returned to focus its operations on the more profitable areas of the business. This can be seen in the loss before tax, which only increased from 1.04 million pounds last year to 1.15 million in 2014 despite the loss of almost 15 million pounds in top line income. Management feel that performance improved in the latter portion of the year and expect that to continue. The shares climbed by 1p to 36p.

Housing support services provider CareTech (CTH) performed in line with expectations for the year ended 30th September. as plans implemented in past periods began to bear fruit and overall occupancy rates continued to increase. Renegotiated deals with local authorities have lead to minor improvements in commercial terms and the recent acquisition of training firm EQL is expected to provide synergies over the coming years. Full results will be released in December. The shares grew by 2.5p to 228.5p.

Semiconductor specialist IQE (IQE) has signed a contract worth around $1.1 million (0.69 million pounds) over the next 12 months to supply infrared materials to a leading microchip manufacturer, representing the single largest order of indium antimonide products in the firm’s history. Management say the scale of the contract is testament to the high quality of IQE’s offerings. The shares ended the day flat at 16.25p.

Farming and timber firm Obtala Resources (OBT) has agreed terms for the purchase of a 72.7% stake in a Lesothan department store operator for a cash consideration of $0.8 million (0.5 million pounds) and the taking on of $0.6 million (0.38 million pounds) of outstanding debts. The deal includes five retail sites within Lesotho that generated revenues of $10.5 million (6.57 million pounds) in the last financial year. Management view the purchase as adding distribution channels for existing products. The shares rose by 0.375p to 9.125p.

Defense industry group Cohort (CHRT) announced that its subsidiary MASS has won a contract to provide electronic warfare support services for two years to an unspecified export customer for 9 million pounds. MASS will provide manpower and design services over the duration of the deal and management believe that this win cements the firm’s reputation as the UK’s leading independent electronic warfare specialist. The share price increased by 5.5p to 242.5p.

Cohort hunts down 9 million pound electronic warfare deal