Date: Tuesday 20 Jul 2010
Department store Debenhams has proved an object lesson in why not to buy assets from private equity. Many believe it queered the pitch for other IPOs for several years thereafter.Given the lifting of the burden of debt and the more attractive lending terms on offer there is a good prospect of a resumption of dividend payments next summer. But Debenhams is by its very nature vulnerable to any further fall in consumer demand. The shares currently sell on less than eight times this year’s earnings and are among the cheapest in the sector, but even at this level there seems no compelling reason to chase them says the Times.
With impeccable timing Bank of America Merrill Lynch resumed coverage of International Power with a “buy” note yesterday. Credit where credit’s due; Merrills puts a take-out price of £4 on the shares, and others have suggested 420p, which was the level at which talks with GDF Suez Energy foundered this year. The shares closed up by more than 10% at 350p last night. The shares were well below £3 as recently as May. The deal is not done, though, and shareholders with no appetite for risk might consider taking some profits says the Times.
The sale of Findus
Coal prices may be going up, but miner UK Coal has been battered by the costs of refinancing its growing debt mountain, which wiped another hefty chunk from the share price as it told investors that first-half, pre-tax losses would come in at £94m against £81.5m. UK Coal really ought to have something going for it in the long term but the performance of the shares speaks for itself. Sell says the Independent.
Aquarius Platinum had a torrid day yesterday after South Africa's principle inspector of mines insisted Aquarius needed to alter the way in which its mineshafts were built. The move could reduce Aquarius's reserves and production at its Kroondal and Marikana mines by between 8 and 10%, with unit cash costs rising by a similar figure, cutting 2011 earnings before interest, taxes, depreciation, and amortisation by 23%. A feeble yield of just 0.5%, or thereabouts, provides no safety net, so sell says the Independent.
A half-year trading statement from handled group Psion has reignited doubts as huge foreign exchange movements clouded operational progress. The company is in the awkward position of reporting in sterling when most of its cost is denominated in dollars and its revenue in euros. It still trades at 21 times 2011 earnings forecasts, which isn’t cheap. Hold on for now says the Times.
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