Leading shares are edging higher despite the latest turn in the Greek crisis - with no end in sight despite time running out - and news that the Chinese market suffered its worst weekly fall since 2008.
With the European Central Bank discussing whether to provided further emergency funds to Greek banks, there is little sign of a panic by consumers to withdraw cash. And with further meetings today and probably over the weekend in the run up to the special leaders summit on Monday, there is still hope a deal can be hammered out to keep Greece in the eurozone and provide much needed bailout money.
With the US Federal Reserve’s more dovish than expected comments this week, suggesting a rate rise would come this year but possibly later than economists had been forecasting, investors are calmer but still obviously cautious.
So the FTSE 100 is currently up 6.21 points at 6714.09, and while awaiting developments investors have been taking notice of a number of analyst notes.
Hikma Pharmaceuticals is 83p higher at £19.78 after Citigroup moved from buy to neutral. Citi said:
The shares have declined more than 25%, exceeding consensus earnings per share cuts . On a near-normalised basis (excluding recent product shortage windfalls), Hikma’s base business can deliver almost £1 a share in 2017 estimated earnings, which will be boosted further by incremental shortage opportunities, ramp-up of Bedford products and, importantly, M&A (more than $1bn firepower). Despite our estimates being modestly below consensus, the shares at 22 times 2016 and 19 times 2017 estimates provide what we see as an attractive entry point in light of 5-year organic earnings compound annual growth rate of 14%.
We have previously articulated our concerns around a large transformational acquisition given evidence of excesses in current M&A climate. While those concerns persist, recent management comments (likely following investor pushback) increase our comfort. Chances of a dilutive transaction have diminished given recent sell-off in shares.
Ashtead has added 22p to £11.22 as Exane BNP Paribas raised its recommendation on the equipment hire company from neutral to outperform.
Mining shares have lost much of Thursday’s Fed-fuelled gains, partly on profit taking and partly on renewed concerns about the Chinese economy in the wake of a more than 9% fall in the Shanghai Composite. The index is now firmly in correction territory, having dropped more than 10% from its recent highs as fears of a market bubble grew stronger.
Randgold Resources is down 25p at £45.21 while Antofagasta has fallen 3.5p to 713.5p.
Among the mid-caps Colt has climbed 33.1p or 21% to 189.8p as founding investor Fidelity made an offer to take full control of the telecoms business in a deal valuing it at around £1.72bn. Fidelity- which owns nearly 63% of Colt - is offering 190p a share but independent directors said the offer undervalued the business and a sale to a third party could potentially achieve a better price.
Card Factory is down 27.6p to 331.9p after it said it would place around 2.2% of the company on behalf of management and employees.
Sirius Minerals has fallen another 7% to 17p on contnuing concerns about its plans for a potash mine in the North York moors national park.
