FTSE in-depth: 3i ready to move to another level
It has always been seen as the acceptable face of the private equity space. 3i's fortunes have recovered dramatically after a long period of problems, but the City is now getting impatient of waiting for management to take the bull by the horns and move it to the next level. Word is that dealers will not have to wait too long.
Geoff Foster: The Footsie stopped the rot, rallying 46.44 points to 5,155.84p
Sir Adrian Montague, the former Kleinwort Benson investment banker, who took over as chairman from Baroness Hogg in July, is a dealmaker and desperately keen to wake the group from its corporate slumber.
3i has £2.5bn of cash in the bank after repairing its balance sheet via May 2009's £732m rights issue, priced at a heavily discounted 135p.
Chief executive Michael Queen, who replaced Philip Yea in January 2009, masterminded that fundraising and those institutions who subscribed for stock then must be delighted with the shares closing last night at 257.9p, up 3.7p.
3i has come a long way since being drawn into the culture of highly leveraged buy-out deals in the boom years of 2006 and 2007. Remember, it incurred a staggering loss of almost £2bn in 2008.
Oriel Securities is a fan and has a six-month target price of 325p. Analyst Iain Scouller agrees that 3i is in much better shape than it was 18 months ago, with leverage currently estimated at 10% of net asset value, compared with 103pc in March 2009, before the rights issue.
Prudential put on 6p to 553.5p on hearing that ubiquitous private equity group Blackrock had taken its shareholding in the insurance giant back above 5%. It had reduced it following the aborted £23bn takeover of American International Group's Asian unit. It always voiced concern the deal was too expensive.
The Footsie stopped the rot, rallying 46.44 points to 5,155.84p, helped by a strong mining sector and news of an unexpected fall in US jobless claims, which declined more-than-expected to a seasonally adjusted 473,000 last week.Wall Street traded 20 points higher.
Copper miner Kazakhmys, 56p better at 1129p, gave the sector a lift by reporting strong interim results. Takeover favourite Fresnillo added 47.5p to 1046p in sympathy.
Samir Brikho's thriving oil equipment services giant Amec jumped 43p to 892p in response to good half-year results. The order book stands at £3.5bn and growth in the second-quarter was higher than expected. The balance sheet is strong and holds £670m of net cash. Shore Capital says buy.
Marks & Spencer, which last week confirmed that investment banker Robert Swannell is to replace Sir Stuart Rose as chairman, advanced 6.4p to 340.5p. Bank of America/Merrill Lynch upgraded to neutral from underperform and lifted its target price 20p to 360p.
Recent industry food data has been encouraging and group inventories appear well controlled. Therefore, there is some upside risk to consensus earnings forecast going forward.
The closure of some hefty bear positions and news of director-buying - including chief executive David Andrews purchasing 500,000 shares costing him £614,000 - saw outsourcing group Xchanging rally 13.8p to 121.32p. The shares had fallen further out of bed on Wednesday after management took the unusual step of summoning investors and analysts to a conference call to reassure them that everything in the corporate garden is rosy.
Electric van maker Tanfield hit the buffers on fears about its future. The shares crashed 11.5p, or 40%, to 17.75p on hearing that a fundraising to be structured as an open offer, partially underwritten by certain directors, is on the cards in order to keep the company up and running.
Heavyweight broker Bank of America/Merrill Lynch exerted further downward pressure on Halfords, 6.7p lower at 478.6p, by downgrading the stock to underperform. It follows Daily Mail's revelation earlier this week that the car parts retailers' multi-million pound distribution centre is a shambles and the group is having 'systems issues'.
Excited of late by stakebuilding by Sherbourne Investments, which now owns 11.3% of the equity, F&C Asset Management fell 3.75p to 58.25p after interim results did not come up to scratch. The biggest disappointment was it halved the dividend to 1p, which makes it probable that the final dividend will suffer the same fate. The dividend cut saves some £15m which will help in paying down debt.
Media group STV rose 3.75p to 93.5p following impressive interims. It is now delivering strong growth and is on course to deliver a strong second half. It will be cash flow positive by the middle of next year.
Sirius Exploration, the only potash focused mining company listed on AIM, improved 0.88p to 4.13p. It has struck a deal with Sino-Agri, a significant Chinese group, to bring its Queensland development into production.
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