FTSE in-depth: Majestic raises glass to future

By Geoff Foster for MailOnline
Updated: 05:12 EDT, 2 April 2011

It's dog eat dog in business so you will not find Majestic Wine's bearded boss Steve Lewis getting too upset about seeing another one of his rivals end up in the knacker's yard.

Wine merchant Oddbins' collapse into administration should see many of its customers now buying their cases of wine and champagne at any one of Majestic's 156 UK stores.

Collins Stewart's analyst Wayne Brown certainly agrees that now Oddbins has been binned, Majestic's earnings growth will get stronger. June's annual results should sparkle and full-year profits even beat his forecast of £24.1m, up from £20.5m.

Coupled with the move to selling six bottle cases of wines – it used to be 12 – Majestic's private customer base has apparently increased 14% since the demise of First Quench (Threshers & Wine Rack) in September 2009.

Brown sees no reason why the removal of Oddbins from the High Street will not have a positive effect.

Majestic's market share has risen to 3.5% from 3.1% a year ago and it has been seeing impressive like-for-like sales growth, including a 3.7% gain over the Christmas period despite the snow.

Brown believes the potential for Majestic to accelerate openings and to boost its online presence are significant and he has a target price for the shares of 490p.

They touched 403.25p on his comments before drifting on profit-taking to close 6p easier at 398.5p, still up 50%-plus over the past 12 months.

It was no April fool as the Footsie closed above the magic 6,000 level again following news of a better-than-expected 216,000 jump in US employment numbers and a fall in the unemployment rate to 8.8%, its lowest for two years.

It touched 6,014.77 before closing 101.16 points better at 6,009.92.

It has now jumped 7.4% from the low reached immediately after the Japanese earthquake and tsunami.

Wall Street joined in the fun with an early gain of 53 points on the jobs data which appeared to confirm that the recovery in the world's biggest economy is gathering pace.

Banks led the charge with buyers tempted back into the market by talk that the Independent Banking Commission report, prepared by Sir John Vickers, will be a lot less onerous than feared.

Barclays advanced 11.9p to 289.5p, while the part nationalised duo Lloyds Banking Group firmed 2.91p to 61p and Royal Bank of Scotland 1.55p to 42.345p.

Broker JP Morgan Cazenove advised clients that BP looks seriously undervalued and that certainly did the trick.

They piled into the oil giant leaving the close 16p better at 469.975p. The 52-week low following the catastrophic Gulf of Mexico oil spill was 296p.

Dealers were hoping for a much sexier deal when they saw Centrica's name flash up on the London Stock Exchange's regulatory news service.

Shares of the British Gas parent had been strongly supported earlier in the week on revived takeover talk so news of the paltry £30m acquisition of natural gas assets from Shell Canada left everyone underwhelmed. The shares reflected the general buoyant trend at 330.25p, up 4.9p.

Online gambling group 888 Holdings advanced to 52.5p and closed 6.75p higher at 49.75p amid speculation that the founding Israel-based Shaked and Yitshak brothers, who own 61% of the equity, had rejected a 70p a share cash offer from Ladbrokes, 1.1p cheaper at 131.35p.

The betting shop group is now said to be considering whether or not to increase its offer. The two have been in takeover discussions for months.

A revival of spicy Indian bid talk lifted Coal of Africa 8.5p to 83.375p. Turnover in the coal mining group swelled to 2.8m on whispers that India's International Coal Ventures is lining up a 145p a share cash offer.

Max Petroleum firmed a penny to 17p following a bullish drilling update on the ASK-1 exploration well on the Asanketken prospect in Kazakhstan.

A Morgan Stanley upgrade to overweight and increase in target price to 40p helped Premier Foods add 1.76p to 29.71p.

The broker is confident balance sheet issues have been resolved and the group now has an opportunity to lower interest costs through a final round of restructuring. It is finally in a position to focus on delivering profitable growth.

City of London Group rose 10p to 410p following a placing by Singer Capital Markets of 9m shares at 83p a share.

Directors of the investment company participated in the placing and the £7.5m raised will be used to help develop further the company's existing investments in litigation funding, trade finance and legal receivables funding.