Friday, June 25, 2010

LONDON Pre-Market Report: Berkeley beats profit forecasts

London open 

City sources predict FTSE 100 will open up 16 points from yesterday's close of 5,100. 

Stocks to watch 

Housebuilder Berkeley said the housing market in London and the South East has stabilised as it reported better than expected full-year figures. Pre-tax profit dropped 8.4% to Ł110.3m in the year ended 30 April, on sales of Ł615.3m compared with Ł702.2m last year. The market expected Berkeley to announce pre-tax profits in the region of Ł104.4m on sales of Ł587m. 

Ground preparation engineer Keller has seen no pick-up in its struggling US business. Keller warned six weeks ago of major headaches in the US and today added there have been no have been no significant changes to the group's trading or outlook since then. 

BP has spent another $350,000 (Ł234,000) on the Gulf of Mexico oil disaster since Monday, taking the total cost to date up to $2.35bn (Ł1.57bn) and the number of people dealing with the response effort to some 37,000. 

In the Press 

The UK’s economic recovery is at risk if the nation’s banks do not move swiftly to raise the Ł750bn-Ł800bn needed to refinance their borrowings due by the end of 2012, the Bank of England warns on Friday. UK banks have greater refinancing needs over the next two years than lenders based in the US, Germany, France or Italy, according to the Bank’s Financial Stability Report, its twice-yearly statement on the nation’s financial system, the FT reports. 

US banks and hedge funds will be hit with a $19bn fee to pay costs associated with financial reform, Barney Frank, chairman of the US House financial services committee, said late on Thursday, the FT reports. The proposed levy emerged as an unwelcome surprise for the industry deep into a late-evening congressional session to finalise landmark Wall Street reform legislation. Banks with more than $50bn in assets and hedge funds with more than $10bn will be required to pay into the fund as a proportion of their assets. 

BP’s plans to drill in Alaska are to be reviewed by the Obama Administration in a fresh blow to the embattled oil giant as it wrestles to stem the flow of oil gushing from its ruptured Macondo well. Ken Salazar, US Interior Secretary, told the Senate Energy and Natural Resources committee yesterday that he was examining BP’s proposed Liberty project to drill three miles offshore in the Beaufort Sea off Alaska. “We are looking into the issue right now,” Mr Salazar said, amid concerns that there had been insufficient environmental scrutiny of the project, the Times reports. 

Newspaper tips 

The big bet for Petrofac this year is on Turkmenistan. The oil and gas services company is already seen by the market as a safe haven while fallout from BP's disaster in the Gulf of Mexico buffets oil stocks. Its share price-earnings ratio is set to be about 17 times this year dropping to 14 next. Add in the potential in Turkmenistan, not to mention the opening up of Iraq, and even a 240p price increase since January does not detract too much from the stock's attractions. Buy says the Independent. 

Packaging group DS Smith appears to be gaining market share, and there are signs of improved demand. Achieving sales growth in packaging has traditionally been difficult. However, the scope for the company to return cash to shareholders should its ambitions falter should help to put a floor under the stock. At 122p, up 1˝p, or nine times earnings, and providing a 3.8% yield, stay on board says the Times. 

FTSE 250 software developer Micro Focus lost 13% of its value as it announced the resignation of Nick Bray, who effectively ran the company until a new chief executive came in last month. The company’s’s underlying sales of software licences were also lower than expected in the past six months of its financial year. Even so, the prospects for the company’s niche — enabling old-style mainframe computers to run on new, low-cost hardware — look as sound as ever. At 460p, down 67˝p, or less than 12 times current-year earnings, the shares are a buy says the Times. 

US close 

Fears about the speed of the economic recovery sent Wall Street lower. The Labor Department's weekly report on unemployment claims dropped to a seasonally adjusted 457,000 from 472,000 the previous week. Analysts were looking for a fall to 460,000. 

Orders for durable goods were down by 1.1% in May but excluding the volatile transportation sector, orders rose by 0.9% last month, according to the Commerce Department. Across the markets, the Dow Jones fell 145 points to 10,152. The S&P 500 dropped 18 points to 1,073. 

Merck’s respiratory drug Dulera has been approved by the US Food and Drug Administration. Pfizer, though, has suspended trials of its experimental pain relief drug for osteoarthritis, tanezumab, after reports that patients’ conditions worsened and some needed joint replacements. 

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