Monday, May 5, 2014

Tullow gains 3% on Ghana oil hopes

Tullow Oil shares have picked up recently after earlier weakness on a series of drilling disappointments.
They have added another 28.5p to 848p as the Ghana National Petroleum Corporation said the Jubilee field - where Tullow holds a 35.5% stake - could produce more oil than the budgeted 100,000 barrels per day. The corporation said the average production as of March 25 was 104,000 barrels and this could hit 105,000 to 110,000 in 2014.
Among the other FTSE 100 risers is Kingfisher, 16.4p better at 438.7p. The B&Q owner was boosted by analysts at UBS moving from neutral to buy and raising their price target from 440p to 475p in the wake of the company's plans to buy Frances Mr Bricolage. The analysts said:
With sales of €552m and pretax profit of €17m, pro forma earnings per share enhancement initially looked to be around 2%, assuming the deal passes through anti-trust. However, there could be more upside from converting some of the owned stores (which lost €13m last year) to Brico, whilst at least retaining the profitability of the franchise business at the current level of €37m.

Mr Bricolage will not affect forecasts until completion later this year. For Kingfisher, the year should start strongly given weather patterns, which should also help first half gross margins. While there are structural concerns at B&Q still (online, value retailers, excess space), a cyclical upswing and likely related share gain for the specialists should cover this until there are more B&Q cutdowns and the new management team plans are in place. We currently assume 5% like for like in the UK and 1% in France with gross margins slightly lower.
Among the mid-caps Carillion has climbed 22.3p to 382.7p after a positive note from Cantor Fitzgerald. Analyst Caroline de La Soujeole said:
The company has had a good start to the year with positive contract momentum. We upgrade to buy (from hold) given our belief that pressures on the top-line are receding; the company's substantial order book provides excellent revenue visibility and cash flow performance should also improve in 2014 and beyond. In our view, Carillion is attractively valued compared to a blended construction/facilities management peer group (around 20% discount) and offers one of the highest dividend yields in the sector. [We raise our] target price to 420p from 350p.
With technology stocks recovering some ground after the recent sell-off, Arm has added 36.5p to £10.21 and fellow chip designer Imagination Technologies is up 11.4p to 207.2p.

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