Newspaper article The Evening Standard (London, England)

Building-Equipment Hirers Are in a Hole, Warns Broker

Newspaper article The Evening Standard (London, England)

Building-Equipment Hirers Are in a Hole, Warns Broker

Article excerpt

Byline: MICKEY CLARK

HOUSEBUILDERS aren't the only ones at risk of breaking their banking covenants as soaring debts are exacerbated by falling share prices. UBS warns there are also significant risks on covenants in the equipment-rental sector, which relies heavily on activity in the building and construction industries.

It singles out Speedy Hire, unmoved on a record low of 128p, and Northgate, which bounced off the bottom with a rise of 11/4p at 891/2p, as most vulnerable.

"They have the most pressing concerns on covenants. We have removed any assumptions on dividend payments going forward," UBS says.

The broker reckons Ashtead, steady on 371/4p, is a safer way to play the recovery, given a secure balance sheet. But it has cut its price target on Ashtead from 45p to 40p and on Northgate from 120p to 100p. Both companies continue to be rated at neutral. It has lowered Speedy Hire's target from 140p to 115p, with the shares rated a sell.

Shares generally were a touch softer for choice where changed. An absence of fresh redemptions among the hedge funds and the reluctance of institutional investors to open fresh positions ahead of the Christmas holiday have seen turnover slow to a trickle. The FTSE 100 index lost 20.77 at 4346.51.

Supermarkets group Wm Morrison fell 71/4p to 2713/4p after Goldman Sachs downgraded the shares from neutral to sell and trimmed its target from 239.7p to 220p. The shares have outperformed the rest of the food retail sector by 30% and big rivals Tesco and Sainsbury's by 10% in the past year, more than reflecting strong market-share gains.

But Goldman says Morrisons may now find the going increasingly difficult.

It adds that next month's trading update is likely to produce fairly robust numbers, but it may still find it difficult to live up to City expectations.

Tullow Oil added 331/2p to 529p.

Singer Capital Markets says results from its Kingfisher field in Uganda indicate reserves may be much larger than first thought. They may be big enough to justify an export pipeline, positive news for Tullow and partner Heritage Oil, up 61/2p at 1911/2p.

Other oil stocks ticking better today included Cairn Energy, up 40p at 1684p, BP, ahead 7p at 5191/2p, and Royal Dutch Shell, rising 17p to 1701p. …

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