On the day that the FTSE100 spiked temporarily only to resume the breather it has been taking for a few sessions, Arden Partners issued a note pointing out that equity markets have enjoyed a period of stability over the last three months, with the main UK index increasing steadily from a recent low of 5,027 points on June 8 to the current level of just under 5,600.
The firm reiterated its positive stance on equities and its year-end target for the FTSE100 of 6,100 points. Current valuations continue to be highly attractive, Arden added.
Astaire Securities in its ‘Morning Report’ revisited Rio Tinto’s (LON:RIO, NYSE:RTP, ASX:RIO) announcement from earlier this week that it will invest US$803 million to ramp up the underground block cave project at its Argyle diamond mine in Western Australia.
Following a transition from the current open pit operation, the underground will be fully operational in 2013. The project will extend the life of the mine until at least 2019.
The broker said the news correlates with its own positive view on diamond market fundamentals, and “this news also seems to correlate with what we have been hearing form the diamond mining juniors in terms of marginally stronger pricing.” It went on to say that in its view, the improved condition of the diamond market is not yet reflected in the shares of the AIM juniors operating in that sector.
In a sweeping change in stance, UBS today upgraded its recommendation for UK supermarket chain Sainsbury’s (LON:SBRY) to ‘buy’ from ‘neutral’ and increased its target price to 450 pence from 350p.
“Over the past five years, Sainsbury has established a platform for growth that we believe will transform the business over the next decade. The space pipeline that the company has built will, we believe, drive compound top-line growth of 7.3 percent. The combination of extensions, maturing space and modest underlying density improvements could deliver average LFL growth of around 5 percent between now and 2020,” the bank said.
“The growing proportion of non-food within the sales mix will augment the top-line growth and, on our forecasts, enable the business to deliver compound EPS growth of around 11 percent. We see the dividend more than doubling over the next decade,” it added.
Altium Securities downgraded its recommendation for Domino Printing (LON:DNO) to ‘hold’ from ‘buy’ in the wake of yet another positive trading update from the group, covering the four months to the end of August 2010. This is the fourth upgrade this year, the broker pointed out, and said: “The shares have been strong prior to this announcement in anticipation of upgrades and need to consolidate at this level for a while, for that reason we have moved our recommendation to HOLD.”
This morning’s announcement by private equity group 3i (LON:III) that it is combining its Growth Capital business, which acquires small stakes in companies, with the Buyout business to form one Private Equity business, did not go down well with Evolution Securities.
As 3i “reorganises its business for growth” by merging Growth Capital with its successful Buyout franchise, Jonathan Russell, the head of that Buyout franchise and the driver of a great deal of the value created by 3i over time leaves, the broker commented.”We feel this can’t be good for the risk profile or the franchise.”
“While an expansion into Debt Management would be a good (and a long overdue) move in our view, we also feel that making such a change at the heart of the key investment engine (and the one that has generated the majority of the value and kudos) calls into question the future franchise value of the business.
Evolution is moving its recommendation from ‘Add’ to ‘Neutral’, and the fair value from 375p to 340p.