Only registred members can create thier own customized alerts.
HB Markets Breakfast Today including: Ryanair, Centamin,Mitie and Sthree
The markets
Market opening: Markets are expected to open higher today after EU leaders agreed on greater fiscal integration. FTSE futures were trading 30 points higher at 7.00 am UK time.
New York: News that the EU fiscal compact has been approved helped Wall Street recoup early losses. However, the S&P 500 closed 0.3% lower yesterday.
Asia: The anticipated conclusion of Greece's debt swap deal by the weekend and better-than-expected industrial output data from Japan caused investors to take a cautiously optimistic stance. The Nikkei closed 1.1% higher, while the Hang Seng was trading at +0.8% at 7.00 am UK time.
Continental Europe: Inconclusive talks in Greece and fears that Portugal may need a second bailout prompted investors to sell banking stocks. Germany's DAX closed 1.0% lower yesterday, while France's CAC 40 was down 1.6%.
UK small caps: The FTSE AIM All-Share index closed 0.6% lower yesterday. To read our latest small cap research, click here.
Today's news
German-led fiscal compact in EU; UK and Czech opt out
Twenty-five of the 27 EU members, barring UK and the Czech Republic, have agreed to sign the fiscal compact in March. The compact will enforce strict budget discipline by altering national constitutions and imposing quasi-automatic sanctions on members breaching EU-specified deficit limits. Members also agreed to advance the activation of the €500bn European Stability Mechanism (ESM) by a year to July 2012. EU leaders are under pressure to expand the fund's size, but German Chancellor Angela Merkel has steadfastly refused to consent. Meanwhile, Greece announced that a debt swap deal with private lenders, which is blocking the second €130bn bailout package, could be finalised by the weekend.
France growth revised downwards
France's Prime Minister Francois Fillon revised the growth forecast for 2012 downwards to 0.5% (from 1.0), citing a slowdown in the Eurozone. France may not have to expand austerity measures as the budget provides cushioning against the probable €5bn impact of slowing growth.
Ryanair announced an upward revision to its full year profit guidance to €480m from €440m after better-than-expected earnings in Q3 2011 while releasing an earnings update for Q3 2011 ended 31 December 2011 yesterday. Revenues increased 13.1% y-o-y to €844m in the period despite a 1.7% drop in passengers carried as fares increased 17%. The company recorded a profit after tax of €14.9m following a loss of €10.3m in Q3 2010. Unit cost rose 11% due a rise an 18% rise in fuel costs and 7% increase in sector lengths. Ryanair's management appealed to the UK government for scrapping the Air Passenger Duty (APD) citing Holland's example, where losses due to a decrease in tourist arrivals outweighed the revenues earned by levying such a tax. The management said that despite being hedged against increasing fuel charges, the company's fuel costs for FY 2013 could increase by about €350m. An Extraordinary General meeting has been planned March to include ADR along with ordinary shares in future buyback of up to 5% of issued capital. The company has also plans to return about €500m to shareholders in dividends in 2013.
Our view: The move to ground aircrafts flying unprofitable routes has helped to increase yields and curtail fuel expenses. Also, in times of constrained consumer spending, the low cost nature of the airline is expected fare better than other carriers. Our belief in the stock's performance is re-enforced by the management's upward revision to full-year profit targets. We expect brokers to follow and retain our buy recommendation.
Centamin (LON:CEY)
Centamin, the Egypt-focused gold miner, announced results for Q4 2011 and FY2011 ended 31st December 2011 yesterday. Gold production in Q4 2011 increased 10% y-o-y and 17% q-o-q to 58,965 ounces taking FY2011 production to 202,698 ounces, 35% above FY2010 production levels. The cash cost of production per ounce declined to US$473 in Q4 2011 and the company realised an average gold price of US$1,671 per ounce. Revenues increased 78% to US$85.5m in Q4 2011 from US$48.3m in Q4 2010 however, declined 4% q-o-q due to lower spot prices of gold. Operating profits doubled to US$37.5m from US$18.4m in FY2010. The company said the expansion of the Stage 4 plant at Sukari, Egypt, from existing processing capacity of 5 million tonnes per annum (Mtpa) to 10Mtpa is on track and expected to be complete by Q1 2013. The company is targeting production of 250,000 ounces of gold in FY2012 at an average production cost of US$550 per ounce.
Our view: Since the company announced the 17% q-o-q increase in gold in a production update on 10th January 2012 the stock has gained 19.3%. Whilst the expansion of the Sukari complex could be value enhancing in the longer term, the recent jump in the share price effectively factors-in the current positives of higher production rates and realised price of gold in our opinion. We therefore downgrade the stock to hold from buy.
Mitie (LON:MTO)
Mitie, the outsourcing and energy services company released a trading update for the period from 1st October 2011 till date yesterday. During the period, the company completed two acquisitions. It acquired Utilyx Holdings, a provider of services to address energy needs, for £15m in cash; an additional £1.2m may be payable based on future performance. The management does not expect a meaningful contribution to earnings from this acquisition in the first year. The company also acquired a majority stake in disability consultancy company Direct Enquiries for £0.3m. Another £8.3m could be due over the next five year period subject to future achievements. The management said that revenue and earnings have been in line with expectations. The company continued to win contracts from both the private and the public sector during the period.
Our view: The current economic environment where companies and governments focus on cost savings is expected to be beneficial for the outsourcing industry. The industry is going through a phase of consolidation and the company has been successful in identifying and acquiring businesses that compliment its services. Also, the company had strong organic growth in H1 2012 highlighting the strong differentiation in its offerings. We like the company for its potential to grow organically and its ability to expand its services through bolt-on acquisitions and thus retain our buy rating.
Sthree, provider of staffing solutions, released results for FY 2011 ended 27th November 2011 yesterday. Revenues increased 14.3% y-o-y to £542.5m basked by strong growth in international markets. Revenues in the UK grew 6.5% y-o-y and 16.1% from continental Europe while revenue from 'rest of the world' were up 74.2% y-o-y. Pre-tax profits increased 40.0% y-o-y to £30.3m from £21.6m. Earnings per share rose 41.2% y-o-y to 16.8p from11.9p. The management declared a dividend of 25p per share, more than double the 12p declared in FY 2010. The management forecasted a bleak outlook for 2012 as the economic conditions erode demand for the company's services.
