Market report: Deutsche Bank closes chapter on WH Smith

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All good things must come to an end — and so it was for WH Smith, whose eight-year tenure on Deutsche Bank’s Buy list finished when the broker cut its rating to neutral ahead of the company’s first-half results at the end of the month.

Analyst Warwick Okines admits the timing of the downgrade is strange given that the most recent quarter was the only one in eight years where like-for-like, High-Street sales were not negative. However, he argues that at 17.6 times earnings for next year, investors should look elsewhere for bargains, even though he expects a solid set of half-year numbers. 

The stationer, which was 57.79p cheaper at 1,717.21p, has been one of the safest investments on the stock market in recent years, having proactively shifted its focus away from the High Street to protect itself from the downturn.

On the flipside, Okines upgraded Poundland, 7.2p better off at 152.4p, to buy. The discount retailer has lost two-thirds of its value over the past year, falling below its 200p float price from 2014.

On the wider market, the FTSE 100 drifted 67.52 points or 1.15% lower to 5780.54, with Chinese markets closed for their new year.

ARM Holdings was the biggest blue-chip faller, down 45p to 938p, on the back of a huge profit warning from another Apple supplier, Imagination Technologies, which is waving goodbye to its boss.

Only the miners avoided the sell-off, with Randgold Resources top, up 139p to 5439.3p, and Rio Tinto, 35p ahead at 1853p. 

Meanwhile, fears that G4S could suffer a downgrade from ratings agencies and subsequently issue another load of shares to bolster its balance sheet sparked a rush for the exit. When S&P last cut its rating from BBB-/stable to BBB-/negative, the security group tapped investors for £343 million to avoid any further downgrades. The shares, now on the FTSE 250 after their recent relegation, slumped 12.7p to 196.7p as broker Jefferies cut its stance to underperform.

On the junior AIM market, Barbados hotels operator Elegant Hotels dipped 0.5p to 110p as it agreed to buy Swiss International, the owner of the Waves Hotel and Spa, for $18 million (£12.4 million).Close to $5.5 million will be settled in cash, while Elegant Hotels will take on more than $12 million of Swiss International’s debts.

A profit warning hurt cardiovascular-monitoring company LiDCO, which slid 0.38p, or 5.5%, to 6.5p, while self-storage company Lok’nStore firmed 9.9p to 329.9p as like-for-like revenues rose 5.4% in the first half.

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February 9, 2016 |
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