Market Report: Invensys Climbs as Broker Says 140p-Plus 'Fair Value'
Jivkov, Michael, The Independent (London, England)
GOLDMAN SACHS pushed Invensys to the top of the blue-chip gainers list yesterday as it applauded the recent trading statement from the engineering giant. Goldman urged clients into the stock and said it was reassured by comments from management that the company would not breach its banking convenants during the current fiscal year. The US broker told clients that fair value for Invensys shares stood at 140p to 150p and reiterated a "market outpeform" recommendation.
In its statement to the market on Tuesday Invensys said encouraging signs continued to emerge in its appliance and climate controls unit and at its automation and controls division. Last Friday's pounds 375m sale of the group's flow controls business is seen by Goldman as a significant step towards management achieving their debt reduction target for 2003. At the end of trading yesterday Invensys shares were 6p higher to 123p.
There was also good news for shareholders of United Utilities, up 18p to 620p. Investors were cheered by claims from management that the group is on target to achieve cost savings during the current regulatory period of pounds 450m to pounds 480m, an outperformance of its regulatory targets of some pounds 80m. The company also said full-year profits would be in line with expectations. United boasted that sales at its asset management services arm will nearly double this year.
The FTSE 100 index was 19.2 points better to 5,214.7 as Wall Street achieved tentative gains at the start of the session. BSkyB rose 27.5p to 814.5p in response to the collapse of its major competitor, ITV Digital. Most observers are now expecting Sky to mop up ITV Digital's customer base. Amid the fallout from the collapse, the set-top box maker Pace Micro lost 9.5p to 71p. Commerzbank Securities argued that the ITV Digital joint venture between Carlton Communications, up 5.75p to 272p, and Granada, up 4p to 142.5p, was a relatively insignificant customer for Pace. The broker retained its "hold" rating on the stock. The analyst Gilad Alper did, however, warn that ITV Digital being placed into administration could have a long-term effect on Pace's efforts to spearhead digital TV adoption through free set-top boxes, which was supported by the now stricken company.
Vodafone retreated 0.5p to 129.5p despite the best efforts of a series of heavyweight brokers. Schroder Salomon Smith Barney reiterated its "outperform" rating on the stock while UBS Warburg and Merrill Lynch urged that the stock was a "strong buy" at current levels. Despite recent suggestions the trio seemed to agree that there would be no major changes to estimates for Vodafone's full- year figures.
Cadbury Schweppes gained 5.75p to 479p after positive first- quarter volume forecasts from peer Coca Cola. The US soft drinks giant forecast a volume increase in North America of 4 to 5 per cent, well ahead of analysts expectations of 3 per cent. The impressive numbers reflect bullish industry factors such as unusually mild weather, the Winter Olympics and an early Easter. ABN Amro said the figures from Coca Cola show an encouraging start to the year which will benefit Cadbury, owner of the Dr Pepper brand, and argued that the bears on Cadbury's US prospects are misguided. …