Market report: Tuesday close
There was more bad news, this time fromthe brokers, for shareholders of J Sainsbury today, just 24 hours after Qatari-backed Delta Two dropped its 600p-a-share offer.
SG Securities has reduced its call from hold to sell and slashed its target from 600p to 340p after the collapse of the Delta Two offer, which valued Sainsbury's at almost £11bn. The broker has also downgraded its earnings forecast.
It was surprised by news of the abandoned deal and says the retailer is likely to come under renewed pressure from shareholders, such as Robert Tchenguiz with 10%, to leverage the property portfolio to create value.
JPMorgan downgraded Sainsbury's from neutral to underweight but raised its target from 400p to 440p, putting it in line with rivals Tesco, 3¼p cheaper at 476½p, and Wm Morrison, off 3p at 280½p. It warns investors not to expect a new bid, given the credit-market turmoil. Morrisons remains JPMorgan's favourite in the food-retail sector.
Goldman Sachs, meanwhile, has lowered its sights on Sainsbury's from 613p to 465p. The shares, down 20% yesterday, rallied 5p to 445p on bear closing today - but any improvement may be short-lived.
A few bargain-hunters made their presence felt in the wake of yesterday's sell-off, and this helped lift the FTSE 100 index 13.47 points to 6474.9 in thin trading. Wall Street also bounced back this afternoon, the Dow rising 9.19 to 13,552.59.
Half-year profits fromMarks & Spencer got the thumbs-up and the shares rose 21p to 653p. Royal Dutch Shell slipped 9p to 2008p despite being downgraded by Credit Suisse from outperform to neutral.
Yell fell 1p to 425¾p after posting a better-than-expected 19% gain in firsthalf headline earnings to £319.8m. It has warned that the US telephone directories market remains 'very competitive', but it expects full-year results to be in line with forecasts.
Morgan Stanley has raised Invesco, 6p ahead at 698½p, from equalweight to overweight and its target from 730p to 850p on the prospect of a re-rating of the shares after a US re-listing in December. The broker said the independent global investment manager trades at a discount to the US average of 17.5 times.
Serco was one of the best-performing second-liners, climbing 9¾p to 446¾p. Citigroup has raised it from hold to buy and ramped up the target from 450p to 525p. The broker says Serco is set to deliver 10% annual revenue growth in the next three years with improved margins boosting earnings per share by between 17% and 20%.
It adds that Serco should also be boosted by winning the Sellafield decommissioning tender and the Glasgow business-process outsourcing contract.
Associated British Foods fell 21½p despite releasing robust results, with profits rising to £613m.
Aim-listed Armour Group firmed 1p to 42p despite a drop in pre-tax profits from £2.05m to £289,000 in the year to 31 August. The consumer electronics firm blamed the setback on a loss from the disposal of discontinued operations. It is confident about the outcome for the current year.
Romanian telecom provider RCS & RDS has pulled plans to list on the London Stock Exchange, blaming current market conditions.
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