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Categorized | Equities

Gold miners among biggest gainers


Posted on November 29, 2012

Gold miners were among the gainers as the London market reached a three-week high.

Petropavlovsk
rose 1.4 per cent to 328.1p and Centamin
added 6.8 per cent to 59.5p with Westhouse analysts putting “buy” recommendations on both stocks.

    “We believe gold share valuations are now compelling,” it said. “Gold mining company managements are beginning to realise that to regain investor interest they must deliver, both in terms of asset management and shareholder returns.”

    Poor delivery of production and cost targets over the past year meant gold equities had significantly underperformed gold over the past year, Westhouse said.

    For Petropavlovsk, it saw the market pricing in a failure to deliver, in spite of the Russia-based group mostly achieving or beating targets in recent years.

    Centamin has been hurt by a court ruling in Egypt last month that found its mining licence invalid.

    Westhouse was encouraged by the company’s robust rebuttal and saw the weakness as an opportunity to buy.

    Highland Gold
    , up 6.8 per cent to 94p, was Westhouse’s top pick in the sector with a 160p target price.

    Separately, Highland repeated 2012 production guidance and declined to comment on speculation that it was interested in buying the Kekura deposit in eastern Russia, which analysts value at around $350m.

    The FTSE 100 advanced 1.2 per cent to 5,870.30, a gain of 67.02 points. The index had risen 4.7 per cent in a fortnight, having gained in all but one of the past nine sessions.

    Rio Tinto
    was up 5.1 per cent to £30.90 after it set a target of $5bn in cost savings by the end of 2014. After cutting production targets on Wednesday, Kenmare Resources
    rose 5.8 per cent to 32.7p.

    It was helped by guidance from Rio, the market leader in titanium mineral sands, that demand would double by 2030. Rio also said it would use a relatively weak market next year to rebuild furnaces, which would reduce supply.



    Pennon
    was up 4.3 per cent to 624.5p after management dismissed concerns that it might have to issue equity. Interim results provided few surprises following a profit warning earlier in the month.

    Invensys
    jumped a further 8.9 per cent to 305p on hopes of a full break-up following Wednesday’s deal to sell its rail division to Siemens for £1.7bn.

    “We suspect it may be only be a matter of time before Invensys is acquired once the sale to Siemens is completed – likely around May 2013,” said RBC. “The disposal of Rail leaves Invensys more focused on automation and eliminates the UK defined benefit pension net deficit, thereby removing two major obstacles for potential acquirer.”

    SDL
    rallied 6.7 per cent to 473p amid vague talk of potential bid interest following a profit warning from the software maker earlier in the week.

    “We believe valuation support is provided by the high levels of M&A activity in a number of SDL’s markets,” said N+1 Singer, SDL’s house broker.

    Contract news lifted National Express
    , up 6.7 per cent to 175.5p, with the bus group saying it had won new deals in North America and Spain.

    Persimmon
    rose 3.2 per cent to 796.5p after HSBC turned positive on the housebuilding sector.

    “We think sales rates, pricing, margins and return on capital will all beat market expectations in 2013,” the broker said.

    Among the fallers, BSkyB
    eased 1 per cent to 771.5p after negative comment from Merrill Lynch and Jefferies. Both brokers worried that growing competitive pressures were forcing Sky to make sacrifices on pricing. Merrill added that the group could try to compete by buying production companies, internet providers or a mobile phone network.

    Wood Group
    slid 4.3 per cent to 780p after the founding family sold a 4.4 per cent stake at 775p apiece. Sir Ian Wood, the group’s outgoing chairman, was not among those selling.

    “Given the family’s apparent lack of interest in the business we would not read anything into this share sale,” said Liberum.

    DIY retailer Kingfisher
    was down 0.6 per cent to 279p after quarterly sales disappointed, though cost control meant earnings matched expectations.

    Packaging maker RPC Group
    lost 8.4 per cent to 390p after interim results showed market conditions remained tough. The euro’s weakness against sterling erased RPC’s earnings growth for the period.

    CPP Group
    , the credit card protection specialist, slumped 21.3 per cent to 15.8p after US peer Affinion said it had decided not to make a takeover offer.