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News & Tips: Gulf Keystone Petroleum, Afren, Lekoil, Direct Line Insurance & more

Equities are up again, but for how long?
June 26, 2013

Equities have started the day up a little in London after yesterday’s brief rally and promising economic data from the US overnight with concerns around China still paramount. The Trader Dominic Picarda is not convinced that the latest action is anything but a dead cat bounce and thinks further downside is likely.

IC TIP UPDATES:

Gulf Keystone Petroleum (GKP) announces that the field development plan for its Shaikan discovery in Kurdistan has been officially approved. We keep our buy rating.

Afren (AFR) and recent Aim float Lekoil (LEK) have announced a sizeable oil discovery offshore Nigeria. The exploration well at Ogo-1 encountered a gross hydrocarbon section of 524ft with 216ft of net stacked pay which indicates that initial estimates of 78m barrels of oil will be exceeded. We retain our buy recommendation on Afren.

Sell recommendation Direct Line Insurance Group (DLG) is to accelerate its cost saving programme, at the potential cost of another 2,000 jobs. The original plan to cut £100m from its £1.134bn cost base has been expanded with a new target of a £1bn cost base in 2014. The plan will cost around £180m but deliver gross annual cost savings of more than double the £100m originally targeted.

Kentz (KENZ) continues to trade solidly and has already secured 82 per cent of 2013 target revenues. The company’s backlog has also risen by 9 per cent to $2.8bn and its pipeline of prospect by 6 per cent to $14bn. Buy.

Stagecoach (SGC) delivered expectation beating earnings per share growth in the year to April with pre-tax profits up from £202.5m to £218.9m. The dividend is also increased by 10 per cent. We keep our buy rating.

Mobile payments specialist Monitise (MONI) has launched a partnership with Lloyds to develop mobile card payments for small businesses. Buy.

KEY STORIES:

International Consolidated Airlines (IAG) has launched a $927m bond issue secured against an underlying collateral pool of planes which will be delivered over the next 12 months. This is a regular form of financing in North America.

A newly formed Irish property company, Green REIT, has announced its intention to float in Dublin and London with a view to raising €200m to invest in Irish commercial property.

Indonesian coal miner Bumi (BUMI) says it is on target for production of 23m tonnes this year with production up by 27 per cent against last year and cost of sales down 9 per cent. Bumi shares remain suspended.

Bunzl (BNZL) has delivered revenue growth of 11 per cent in the six months to June, with organic revenues up by 2 per cent and the rest delivered by acquisitions. Half year results are expected to be hit by higher financing costs due to acquisitions.

OTHER COMPANY NEWS:

Walker Greenbank’s (WGB) strong run has continued with the company reporting growth in brand sales running ahead of that at the time of its preliminary results.

Abu Dhabi hospitals group Al Noor Hospitals (ANH) has been admitted to trading on the London Stock Exchange this morning.

Shares in healthcare IT business Craneware (CRW) have taken a hit after the company admitted that contract slippage in recent months, due to corporate activity in its client base, means results for the year to June will come in below expectations.