Date: Friday 25 Jun 2010
Nomura Securities said the market could be bracing itself for what it calls ‘a near term credit event around BP’, and that the speculation is ‘highly damaging’ for the embattled oil company.The perception of near-term credit risk is of concern, and is likely to lead to constraints around counterparty trading, the attractive roll of drawn commercial paper and the ability to dispose of assets at attractive prices.
“Therefore, we see pressure growing on the company to assure sufficient funding to cap the well and meet 'fat-tail' scenarios around near-term expenses,” said Nomura analyst Alastair Syme.
Nomura’s preferred short term solution for BP would be an equity-linked financing, possibly with a sovereign wealth fund underwriting the issue.
“We see equity dilution as countered by the benefit of financial solidity, around which our new 465p/share price target is based,” the broker concluded.
Results from US database giant Oracle and revised guidance from design software firm Autodesk both confirm that the recovery of the tech sector is still underway, Panmure Gordon reckons.
“The most applicable read across is to Autonomy,” Panmure Gordon analyst George O’Connor suggests. “We envisage Autonomy reporting in line with expectations, but the operational KPIs [key performance indicators] point to an underlying improvement. Confident in the outlook statement we retain our Buy,” O’Connor said.
The updates from two of the heavy hitters of the US software scene bode well for Autonomy’s original equipment manufacturers’ (OEM) business, in Panmure’s view. The broker had previously assumed that OEM sales would show little or no quarter on quarter growth but now thinks that assumption is a little on the conservative side.
The broker has a target price of 2151p for the stock.
Somebody was buying shares in inter-dealer broker ICAP on Friday, as it was the morning’s best performing blue-chip, but it was unlikely to be Singer Capital Markets driving up the share price as it now thinks the stock’s value is up with events.
The broker has adjusted its recommendation from “buy” to “fair value” while leaving its target price unchanged at 410p, some 10p or so above the market price on Friday morning.
The shares have had a good run over the last three months in both absolute and relative terms, and with the projected price/earnings ratio based on Singer’s 2011 earnings estimates now loitering around 12, the broker no longer thinks the shares are worth chasing.
The investment case may be worth revisiting later this year, however, with Singer analyst Tintin Stormont expecting earnings forecasts to be upgraded. Cash conversion remains strong and “as such, it is also likely that dividend forecasts will rise, although visibility at this stage is low in our view.”The company is due to provide a trading update at its annual general meeting on 14 July.
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