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10 February 2011 BOND BLITZ: What soaring yields mean for equities – page 32
Vol 13 Issue 06
NEW BOSS
BOOST
Grafton man to
work his magic
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THOUGHT
DP Poland’s
pizza plan
EARLY
RISERS
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Contents
Inside this week...
It may be known as the ‘junior 04 Opinion
14 Cover Story market’ but there are firms Top lines are good but watch the
cost base
listed on Aim capable of
delivering giant returns to
06 Agenda
shareholders if you buy into
Buy Gulfsands on weakness
them early enough in their
earnings growth cycle. Simon 10 Plays
Keane and the Shares team
Former BSS boss to work his magic
scour the market to unearth
on Grafton
20 up-and-coming firms ready
to make it big. 14 Cover Story
Early risers
24 Small Caps
Domino’s set for Polish debut
38 Sector report: 28 Feature: UK Stock Market Awards
Food & drug Excellence deserves recognition
Opinion
Rising raw material prices are crimping margin expansion in some sectors
should still pay to stick with 60,000 such as the leading brand-
luxury goods firms as their ed and luxury goods
brands give them pricing 50,000 providers, Shares remains
power. Burberry (BRBY) convinced the best plays
and Mulberry (MUL:AIM) 40,000 this year will be resource
are our preferred plays capital expansion picks
30,000
here, while chemicals sub- such as Fenner (FENR)
supplier Croda and Titan Europe
20,000
International (CRDA) is (TSW:AIM), oil firms
also well placed. We also such as BP (BP.) and
10,000
demonstrate in this week’s exporters of price infla-
Sector Report how super- tion in the form of the
0
market chains Tesco Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 commodity explorers and
2007 2008 2009 2010
(TSCO), Morrison (MRW) Source: Volvo producers themselves. ■
Agenda Tomorrow’s
Tomorrow’s news
news today
today
Buy Gulfsands
Ignore HMV on weakness
bid chat
lthough there are growing
420
400
380
GULFSANDS PETROLEUM
FTSE AIM SS OIL & GAS
Rebased to first
340
value per share of 353p, as estimated by
position broker RBC Capital Markets. Investors
320
300
ell on chat Premier Foods should get in ahead of a likely reserves 280
240
220
F M A M J J A S O N D J
Source: Thomson Datastream
Such a deal following the disposal of of the year (6 Jan) Gulfsands has fallen
Quorn would significantly lower the 18% as the market has been spooked by A poor result from the highly antici-
quality of the company’s earnings. political strife in the Arab world and poor pated Zahraa-1 well in Syria last month
The group’s pricing power would well results. The £400 million market cap (7 Jan) has also been unhelpful for sen-
fall still further making cost recov- has exploration assets in Tunisia, the ini- timent. Fears remain unrest will spread
ery more difficult. Anyone still hold- tial focus of the crisis. ADX Energy to that country too. At present this con-
ing stock should bale out now. (JM) (ADX:ASX), the Australia-listed operator cern looks largely unfounded, with little
Shares says: Sell at 22.9p. of the Sidi Daher well onshore Tunisia in sign in Damascus of the mass protests
which Gulfsands has a 40% stake, has said that have rocked the Tunisian and
drilling will be pushed back from the Egyptian capitals.
SABMiller to beginning to the end of February due to Shares says: Buy Gulfsands
the instability. Petroleum at 329p.
pack a punch
ext Tuesday (15 Feb) Reports of bid activity could boost India-based oil company
N Fosters (FGL:ASX) is
expected to unveil the
timetable for its divorce from
Hardy buoyed by BP
Carlton’s underperforming wine Tom Sieber
interests and SABMiller (SAB) is nergy giant BP’s (BP.) reported interest in the D6 block, in the KG basin
thought to be mulling a £7 billion
bid. This is well within the bever-
age giant’s financial capacity. Such
a deal would be well received by
the market as the group has had a
E offshore India, could have a positive read-across to oil explorer Hardy Oil
& Gas (HDY). It has stakes in two neighbouring licences, D9 and D3, so
risk-tolerant investors might like to buy in to Hardy on weakness.
Shares in the £105 million market cap have given up 28.4% year-to-date follow-
ing January’s announcement of an unsuccessful result from an exploration well on
happy knack of successfully inte- D9. Hardy has a 10% stake in both D9 and D3 which are in turn operated by Indian
grating acquisitions. (JM) conglomerate Reliance Industries (RIL:BSE). BP is reported to be in talks with
Shares says: Buy SABMiller the latter about acquiring between 30% and 45% of its 90% interest in D6.
at £20.82. Confirmation of this deal and further clarity on terms could help to drive a
recovery in Hardy’s share price for whom an expected reserves update before the
end of next month offers a further near-term catalyst.
Shares says: Hardy is a Speculative Buy at 155p.
Tomorrow’s
Tomorrow’snews
newstoday
today Agenda
Improving picture
at Vitec
Simon Keane
nvestors should buy camera accessory specialist Vitec
Agenda Tomorrow’s
Tomorrow’s news
news today
today
O
Chris Menon
has worked out nicely and generated a healthy 28% profit. But suggestions he disposal of its woundcare
China faces an ever-growing corn deficit and demand from the US ethanol
industry indicate the commodity price has further to go.
Commentary from the US Grains Council suggests China faces a deficit of ten to 15
million tonnes of corn in 2011 – the equivalent of up to nearly 600 million bushels.
American officials now believe the superpower will import nine million tonnes of the
T business for up to £2.7 mil-
lion is a major step for trou-
bled biotechnology firm Ark
Therapeutics (AKT) as it embarks
upon a recovery programme. Risk-tol-
commodity, up from prior erant investors might like to punt
Soyabeans to corn ratio
estimates of seven million. 4.0 the stock as the £10 million cap con-
China has already Historic soyabeans to corn ratio = 2.54 tinues to implement its strategic
banned industrial use of 3.5 restructuring plan.
corn but the US has stuck The sale both removes a cash drain
3.0
to its approval for the use and provides Ark with £765,000 in read-
of gasoline blends con- ies straight away. The buyer, Crawford
2.5
taining 15% ethanol for Woundcare, will pay a further £1.9 mil-
2006 to 2011 model year 2.0 lion upon the achievement of certain
cars. Rising oil prices revenue and other milestones.
2.0 the historic trigger for corn planting
also make ethanol a 1.5
80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10
Ark had net cash pile of £13.5 mil-
tempting alternative but lion as of 30 June 2010 and in interim
this means the fuel industry is again competing with the food industry for management statement (11 Nov ‘10)
supplies, at least in America. confirmed it had sufficient funds to
Shares says: Buy ETFS Corn at $2.08. last until 2013, despite ongoing opera-
tional losses. By this time it should
$10,000
Ark’s Phase III brain cancer drug
LME-Copper, Grade A Cash U$/MT
ETFS CMOD.SECS.COPPER Cerepo to obtain regulatory approval
10.50 000'S from the European Medicines Agency.
Copper has breached the $10,000 a 10
After 12 years as chief executive offi-
9.50
tonne barrier for the first time on the cer Nigel Parker stood down and was
9
London Metal Exchange amid an replaced by former chief financial offi-
8.50
improving prognosis for the health of the cer Martyn Williams, while industry
8
global economy and signs of a widening veteran Iain Ross was brought in as
7.50
imbalance between supply and demand 7
chairman. The company made the
of the commodity. In Shares’ view these 6.50 decision to conserve what cash
will be enduring trends and investors 6 remained, dispose of non-core assets
can gain exposure to this market 5.50 and seek partners to fund the develop-
F M A M J J A S O N D J
through the exchange-traded commodity Source: Thomson Datastream ment costs of its late and early-stage
fund ETFS Copper (COPA) at $50.44. drug pipeline. Ark’s products focus on
The red metal has earned the sobriquet ‘Dr Copper’ thanks to its sensitivity to unmet medical needs within vascular
growth and status as a barometer for economic activity, particularly in China disease and cancer.
and other emerging markets. Yet the ongoing strength also reflects significant Williams confirms to Shares he is still
supply-side issues optimistic a partner can be found for
The pressure on output was highlighted last month by Freeport-McMoRan Copper one of his firm’s drugs by the end of the
& Gold (FCX:NYSE), the world’s largest listed copper miner, which indicated along- year. It addition, the company expects to
side its fourth-quarter results (20 Jan) its copper production had fallen by nearly 5% have make significant progress in its
in 2010. In the attached commentary to its own full-year numbers this week (8 Feb) efforts to win contracts for its under-
Anglo-Swiss mining giant Xstrata (XTA) noted the development of new copper utilised state-of-the-art facility genetic
projects remained ‘challenging’ thanks to labour and engineering shortages, political medicines manufacturing facility in
risk and more onerous regulation. Kuipo, Finland.
Shares says: Buy ETFS Copper (COPA) at $50.44. Shares says: Speculative Buy at 4.5p.
Tomorrow’s
Tomorrow’snews
newstoday
today Agenda
12-MONTH PROFIT ON ALL ‘PLAYS OF THE WEEK’ TRADES: +21.7% VS. FTSE ALL-SHARE +7.1%*
We research all the major market sectors for funds that make the
grade, looking for quality of management, performance and
investment approach.
The Select List at a
The Select List consists of just over 80 funds, and is updated every
glance:
three months. To review it now, go to fidelity.co.uk/select. And get
ready to pick out some real gems. ✓ Just over 80 top funds
from 15 key sectors
Of course, investments into an ISA will depend on individual
circumstances and all tax rules may change. The value of ✓ Selected by Fidelity’s
investments can go down as well as up and you may not get back fund experts
the amount you invested. The Select List is not a recommendation
to buy or sell funds. If you’re unsure about the suitability of an
✓ All funds available in
an ISA
investment please contact a financial adviser.
Issued by FIL Investments International, authorised and regulated in the UK by the Financial Services Authority. FIL Limited, established in Bermuda, and its subsidiaries are commonly referred to as Fidelity International.
Fidelity, Fidelity International and the pyramid logo are trademarks of FIL Limited. CSO1833/0411
Job No: 43939_11 Publication: Shares Size: 270x205 Ins Date: feb 2011 Proof no: 1 Network Tel: 020 7291 4700
100211 p12 plays 8/2/11 3:40 pm Page 12
M
GOLDSTONE RESOURCES ining investor Obtala Resources (OBT:AIM) has revealed the acquisition of a
FTSE AIM SS BASIC RESOURCE 5.5% stake in GoldStone (GRL:AIM). A regulatory announcement (2 Feb) showed
10 Rebased to first
2 Feb – Obtala 5.5%
stake revealed
it had bought 12.3 million shares. We believe this is positive for GoldStone's share
9
price as Obtala has a history of building up substantial holdings, rather than simply buying
8
4 Oct 10 – Market 27 Jan – Shares
7
likes Akrokerri buys at 7.3p once. We remain buyers of GoldStone as Obtala's investment provides another reason why
acquisition
6
we think its shares will go up in value, alongside the exploration and permit expectations
5
underpinning our 7.3p 'buy' call (Plays, 27 Jan). An Obtala spokesperson said the company
4
likes Ghana's large gold deposits and believes Goldstone's assets in the country can be
3
drilled up quickly, thereby potentially creating value in a short space of time. Obtala made
2 282% profit from its investments in Kopane Diamonds between March 2009 and October
1 2010; and 150% from its original purchase of shares in GGG Resources (GGG:AIM) in
F M A M J J A S O N D J F
Source: Thomson Datastream September 2009 before it exited a year later after peaking at 16.2% ownership. (DC)
O
ngoing sales growth is reason to keep buying electronics and maintenance products
FTSE ALL-SHARE SUPPORT SVS
300 Rebased to first distributor Electrocomponents (ECM). The FTSE 250 firm said last week (4 Feb)
280
1 Nov 10 – Market likes
e-commerce boss hire
sales increased by 19% in the four months to 31 January 2011. It shifted from a
30 Sep 10 – Shares
country to regional focus in Europe 18 months ago and the strategy has paid off with higher
260
buys at 230.7p
sales. The UK's 11% gain was better than analyst expectations but Asia Pacific's 15%
240
growth was seen to be an underperformance. The company says the UK has benefited from
220 strong manufacturing activity while the Asia Pacific result was influenced by tough compar-
200 ative figures as Japan had such a good outcome in the first half of the year. The £1.2 billion
4 Feb – Positive
trading update cap says marketing initiatives are underway which have yet to translate into sales.
180
Electrocomponents, first highlighted at 230.7p (Shares 23 Sep '10), has gone from total
160
F M A M J J A S O N D J F dependence on the UK in 1990 to generating 70% of sales from international markets. (DC)
Source: Thomson Datastream
100211 p14-22 Cvr story 8/2/11 3:51 pm Page 14
EARLY
It may be known as the ‘junior
market’ but there are firms listed
on Aim capable of delivering
RISERS
giant returns to shareholders if
you buy into them early enough
in their earnings growth cycle.
Simon Keane and the Shares
team scour the market to
unearth 20 up-and-coming firms
ready to make it big.
T
he debate continues underlying economy and ride out any survivor of a debt advisory sector that
to rage as to further volatility as the Coalition’s collapsed in 2006-07 after the High
whether economic austerity plans start to bite. Street banks started rejecting IVAs. As a
growth will be at result the company is now in a position
a premium in Prime plays to prosper. IVAs have won back trust
2011 and beyond. Our hit list includes a trio of resource-relat- with the banks and look due again to
Austerity measures ed names: South American-focused oil pro- become the preferred personal insol-
and deficit-reduc- ducer Amerisur Resources (AMER:AIM); vency solution, just as financial distress
tion plans are start- gold digger Minera IRL (MIRL:AIM), due among UK consumers is set to pick up.
ing to kick in, and the disappointing 0.5% to open a second gold mine next year; and
drop in fourth-quarter UK GDP hardly Titan Europe (TSW:AIM), a manufactur- Market in flux
helps the case of the optimists. But the er of tyres and undercarriages for off-road Since there are 1,170 non-investment
good news is when it comes to small caps vehicles used in mining and thus a straight companies on Aim we have already fil-
sometimes such big picture concerns sim- play on explorers growing their capital tered out about a third by using the
ply do not matter. Even the dourest of expenditure as they seek to expand FTSE Aim All-Share index as our uni-
bears must acknowledge Aim offers production and capitalise upon booming verse. The main benefit of focusing on
investors a chance to access some of the commodity prices. this benchmark is the companies in
world’s fastest-growing companies, many With oil smashing past $100 a barrel it have to meet certain liquidity require-
of them offering secular growth stories and gold near multi-year highs it may not ments to make the cut and Aim’s long
and the prospect of earnings advances be the biggest surprise to everyone many tail of infrequently traded, sometimes
whatever the economic conditions. As one Aim firms look capable of delivering supe- impossibly illiquid counters is excluded.
of the most successful junior platforms in rior growth, given their resources expo- By its very nature Aim is more likely to
the world, Aim provides exposure to a wide sure. But there are also some great UK- have faster growing companies than the
breadth of both international and domesti- facing businesses to be found, including Main Market as its constituents tend to
cally-focused plays. online fashion retailer ASOS (ASC:AIM) be firms at a very early stage of their life
Shares has searched through the 800 and Majestic Wine (MJW:AIM), both of cycle. Some may have no profits, some
companies that constitute the FTSE which make our list of 20 preferred picks. even no revenues and just a fantastic
Aim All-Share, excluding investment As ASOS demonstrates, success in product, service or concept they are on
companies. Our research has pinpoint- the UK can be used a launch pad for the cusp of commercialising. Watching
ed 103 names forecast to expand their international expansion in to faster- such a fledgling make its vision work,
earnings per share (EPS) by at least growing overseas markets. This transi- turn it in to a gushing profits stream and
10% this year and 10% next (see pages tion has already been successfully exe- soaring share price is a truly satisfying
16-17). From this initial list we have cuted by accessories specialist feeling for any investor.
then isolated our preferred 20 plays, the Mulberry (MUL:AIM), another of our Aim is designed to let such potential
names we consider to have the very key Aim selections. flourish and its admission rules are
brightest growth prospects. We have also identified recovery sto- more flexible than those of the Main
According to the latest forecasts from ries to complement our secular growth Market. To have a quotation on the
the Office for Budget Responsibility choices, not least as during recessions it London Stock Exchange’s (LSE) Main
(OBR) the UK’s gross domestic product is often the smallest companies that get Market a company first has to join the
(GDP) is set to expand by 2.1% this year hit the hardest. One example of this is Official List, as supervised the Financial
and 2.6% in 2012. All our picks look micro cap ClearDebt (CLEA:AIM), an Services Authority’s (FSA) UK Listing
primed to increase their bottom lines £8.3 million cap provider of Individual Authority. To join the Official List a
well in excess of the growth in the Voluntary Arrangements (IVAs). It is a company needs to meet high minimum
50
Number of IPOs (LHS)
FTSE Aim All-Share (RHS) 1200
40
30 900
20
600
10
0 300
M AM J J A S OND J FM AM J J A S OND J F M AM J J A S OND J F M AM J J A S OND J FM AM J J A S OND J F M AM J J A S OND J F M AM J J A S OND J F M AM J J A S OND J F
2003 2004 2005 2006 2007 2008 2009 2010 2011
P
Company EPIC Price Market Sector Most recent 2011 2011 2012 2012
(p) value EPS (p) forecast forecast forecast forecast
(£m) EPS (p) EPS EPS (p ) EPS
growth (%) growth (%)
IndigoVision IND 505.0 38.0 Software & Computer Services 25.6 34.5 34.8 40.0 15.9
Individual Restaurant IRC 10.8 6.4 Travel & Leisure 0.6 1.2 99.1 1.5 26.3
International Greetings IGR 70.5 37.8 Media 3.8 7.3 94.1 10.4 42.5
Iomart IOM 90.5 93.8 Software & Computer Services 1.2 2.7 115.9 4.2 58.2
IQE IQE 53.5 274.5 Technology Hardware 1.3 1.7 34.2 2.1 19.2
& Equipment
K3 Business Technology KBT 193.5 49.9 Software & Computer Services 10.2 23.4 129.9 27.1 15.9
Lok’n Store LOK 125.3 32.1 Support Services 0.9 1.7 89.2 2.0 17.4
Lonrho LONR 18.3 214.3 Financial Services 0.0 0.8 999.0 2.3 184.0
Lupus Capital LUP 129.0 167.5 Construction & Materials 12.0 13.2 10.0 14.7 11.4
M&C Saatchi SAA 129.0 79.8 Media 11.3 13.8 22.7 15.2 10.0
Majestic Wine MJW 413.3 257.1 General Retailers 18.3 21.8 18.6 24.2 11.3
Mattioli Woods MTW 325.0 57.1 Financial Services 16.6 21.1 26.9 23.5 11.6
Maxima Holdings MXM 102.5 25.9 Software & Computer Services 4.6 13.9 201.4 15.3 10.0
May Gurney Integrated MAYG 255.0 179.1 Support Services 18.5 23.7 28.1 26.9 13.2
Services
Minera IR MIRL 82.0 98.1 Mining 1.2 4.3 251.9 6.5 51.3
Mulberry MUL 1,367.0 804.8 General Retailers 7.1 21.9 209.9 30.1 37.5
Nature NGR 83.0 64.4 Support Services 4.4 5.8 32.7 8.6 48.0
Netdimensions NETD 19.5 4.9 Software & Computer Services 0.7 2.1 198.6 2.8 30.2
Next Fifteen NFC 82.5 45.8 Media 6.2 8.5 36.0 9.3 10.2
Communications
Norseman Gold NGL 50.3 99.4 Mining 1.0 9.0 815.4 12.6 40.3
Northbridge Industrial NBI 219.0 33.5 Industrial Engineering 23.7 26.3 10.9 30.0 14.0
Services
OMG OMG 37.5 25.9 Software & Computer Services 0.5 3.8 701.7 5.0 33.5
OPG Power Ventures OPG 104.0 298.5 Electricity 0.3 2.6 712.5 5.1 96.2
Pan African Resources PAF 10.5 151.6 Mining 1.1 1.5 40.0 2.1 39.5
Personal Group Holdings PGH 272.5 81.9 Nonlife Insurance 22.3 24.8 11.1 28.9 16.7
Pilat Media Global PGB 50.3 29.8 Software & Computer Services 2.4 4.0 66.7 4.6 15.0
Playtech PTEC 384.0 931.6 Software & Computer Services 32.0 36.3 13.3 40.6 11.8
Plexus POS 58.0 46.5 Oil Equipment; Services 0.9 1.5 68.5 2.5 66.7
& Distribution
Polar Capital POLR 143.0 108.4 Financial Services 3.0 7.6 156.1 10.4 37.2
Prezzo PRZ 55.3 125.0 Travel & Leisure 4.1 4.6 13.6 5.2 11.6
PROACTIS PHD 38.5 12.0 Software & Computer Services 3.1 3.5 12.2 4.0 14.3
PureCircle PURE 160.0 247.0 Food Producers 0.8 2.1 171.9 7.9 275.2
Silverdell SID 11.0 16.7 Support Services 0.5 1.5 212.5 1.9 26.7
Skywest Airlines SKYW 30.5 60.9 Travel & Leisure 2.3 3.1 37.8 4.9 58.1
smartFOCUS Group STF 15.8 15.0 Software & Computer Services 0.6 0.8 33.3 1.3 62.5
Somero Enterprises SOM 24.0 13.5 Industrial Engineering 1.0 2.1 110.0 3.1 47.6
Songbird Estates SBD 140.0 1070.9 Real Estate Investment 2.8 3.8 36.4 7.0 84.3
& Services
SQS Software Quality SQS 224.5 62.6 Software & Computer Services 18.5 23.6 28.0 26.4 11.6
Systems
Tasty TAST 26.5 12.7 Travel & Leisure 0.2 0.7 235.6 1.6 123.4
Tikit TIK 250.0 36.8 Software & Computer Services 17.0 22.7 33.5 25.8 13.7
Titan Europe TSW 86.5 71.8 Industrial Engineering 2.1 11.0 421.0 17.8 62.2
Tricorn TCN 17.3 5.5 Industrial Engineering 0.5 1.7 277.8 2.4 41.2
Turbotec Products TRBO 30.5 3.9 Industrial Engineering 3.3 4.3 30.6 7.4 71.6
Ultimate Finance UFG 15.8 7.8 Financial Services 1.7 1.9 14.5 2.7 42.1
Walker Greenbank WGB 53.0 30.8 Household Goods & 2.3 6.3 175.7 7.1 12.0
Home Construction
Workplace Systems WSI 15.8 23.2 Software & Computer Services 0.0 0.2 566.7 0.9 350.0
International
YouGov YOU 49.5 47.9 Media 2.2 3.4 55.1 3.9 13.0
All companies have forecast earnings per share (EPS) growth of 10% this year and 10% next year
For companies with December year ends this year’s EPS growth is based on consensus projection for 2009’s EPS, yet to be reported, and
2010’s forecast EPS
Names selected out of the 800 FTSE Aim All-Share companies, excluding Equity Investment Instruments and Nonequity Investment Instruments
Source: ShareScope
P
hurdles in terms of trading track record, Aim typically attracts more flotations Advanced Medical
and adhere to very high disclosure stan-
dards once listed, as set out in detail in
than the Main Market.
Initial Public Offerings (IPOs) on
Solutions
the FSA Handbook. Aim picked up quite sharply in the last (AMS:AIM) 70.8p
In contrast, Aim follows an ‘exchange- two months of 2010. Nine businesses Market value: £109.5 million
regulated’ model where the supervision came to market in November and ten This year’s EPS growth: 23%
is carried out by the market’s operator, in December (see chart on page 15), Next year’s EPS growth: 19.3%
the LSE. The benefit of this approach is compared to two and seven respective- Medical technology company
entrepreneurial companies offering ly on the Main Market. For the whole Advanced Medical Solutions
higher potential returns that might not of 2010 47 companies floated on the (AMS:AIM) revealed in its pre-close
make the cut for the Official List find Main Market and 29 listed on Aim, update (15 Dec 10) continued progress
their way onto Aim. excluding investment trusts. A since its interims, with full-year fig-
Those investors worried about healthy Aim market should be a good ures likely to come in at the top-end
whether this light regulatory touch on sign for the overall UK economy. of market expectations. Sales of its
Aim will have the same disastrous Banks may be reluctant to lend but in LiquiBand products in the US are
results as it did in the investment bank- 2010 over £6.8 billion was raised on doing particularly well. Consensus
ing industry at the end of the last Aim in total, as firms raised cash to estimates call for during pre-tax prof-
decade can take encouragement from help them invest, grow and take on its during the full year ending 31
several initiatives to tighten the rules. more staff. December 2010 of £5.1 million or 3.5p
In response to a couple of unfortunate in earnings per share. Pre-tax profits
scandals, most notably that involving Healthy competition are forecast to rise 25% to £6.4 million
cash shell Langbar in 2005, and swinge- Aim Tokyo and Aim Italia have been set for EPS of 4.3p in 2011. It is also like-
ing criticism from rival exchanges and up to export the successful Aim model, ly there will be upgrades following
regulatory bodies, new Aim listing regu- although rival exchange groups, includ- results in March. (CM)
lations have been introduced. The LSE ing US technology bourse operator
clamped down on cash shells and via NASDAQ, are trying to give Aim a run
Rule 26 enforced improvements in for its money. After a horrible share ADVANCED MED.SLTN.GP.
FTSE AIM SS HEALTH CARE
transparency. Introduced in February price plunge on Aim, technology play 80 Rebased to first
2007, this insists all Aim firms have a OCZ Technology (OCZ:NASDAQ) last 75
management team, financials and cor- has been able to raise capital in the US 60
porate advisors, as well as full disclosure it could not on London’s junior market 55
50
of regulatory announcements made on may be why mobile marketing and
45
the LSE. advertising technology provider Velti
40
Yet for all of the improved share- (VEL:AIM) has followed it to the US,
35
holder protection, Aim punters do opting for a quote on the NASDAQ 30
F M A M J J A S O N D J
need to be aware of the risks involved. Global Select Market. Source: Thomson Datastream
After all, any small cap which does not Greece-based Velti, which began trad-
generate a profit, or in some cases ing in the US last month (28 Jan)
even sales, could easily turn turtle, if under the mnemonic ‘VELT’, is set to
its product, service or concept goes leave Aim by 30 April. While competi- Amerisur Resources
wrong, proves unworkable or is simply tors may be chipping away at the edges (AMER:AIM) 22.8p
trumped by a new rival. In such cases, of Aim the bigger picture is that it has Market value: £207.9 million
any cash reserves will be quickly been, and remains, one of the most This year’s EPS growth: 225%
exhausted by operating losses and the successful junior markets in the world Next year’s EPS growth: 665.6%
struggling firm either taps you for and a rich hunting ground for investors The South American-focused company
more cash via a rights issue or simply with an appetite for risk. is targeting a near ten-fold ramp up in
folds up as its share price collapses. With our thorough screening exer- output from 570 barrels of oil per day
Et-China.com is a good example of cise Shares has sifted out the winners (bopd) to more than 5,000 bopd by the
the greater risks associated with Aim. from the wannabes and the future final quarter of this year. In order to
Its listing was suspended by the LSE in stars from the never-will-bes, to help achieve this ambitious aim the group is
July after the company failed to pro- risk-tolerant investors back the cream drilling six development wells on its
vide investors with audited annual of the UK-listed small cap crop. Platanillo field onshore Colombia.
accounts. Its quotation was then can- • Thinking of putting your Aim Results before the end of next month
celled altogether last month (4 Jan). stocks in an Individual Savings from an independent audit of both its
But the flip side of the delistings, Account? Ordinarily this is not Colombian fields, Platanillo and Fenix,
whether due to poor disclosure, fraud allowed but next week we explain offer a more immediate catalyst. Adding
in the case of Langbar or a headlong how some of the junior market’s to its appeal, Amerisur (AMER:AIM) is
fall into administration, is simply that companies are eligible. the operator on all of its projects with a
100% stake, allowing it to dictate the should not be concerned Brooks’ ty. The £57.5 million cap emerging mar-
pace of activity and enjoy all of the owner-managers have sold stock, even kets fund manager remained profitable
upside from its success. (TS) though seven directors, led by chief through the two very tricky years of
executive officer Chris Macdonald, 2008 and 2009, even though assets
approach is winning out against com- This year’s EPS growth: 38.2% 2.00
mission-driven fund sales that are set Next year’s EPS growth: 35.7% 1.80
to suffer with next year’s introduction Weakness following Egyptian political 1.60
of the Financial Services Authority’s unrest and concerns about emerging 1.40
F M A M J J A S O N D J
Retail Distribution Review. Investors markets represents a buying opportuni- Source: Thomson Datastream
P
6.00 300
160
280
5.50
140 260
5.00
240
4.50 120
220
4.00 100
200
3.50
80 180
3.00 160
60
2.50 140
2.00 40 120
F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J
Source: Thomson Datastream Source: Thomson Datastream Source: Thomson Datastream
concentrated upon niche sectors such but plans to grow to at least 250 by
as gardening and craft. The latest accelerating its opening programme to Minera IRL
trading update (14 Jan) was encour- a minimum of 10 a year. The company (MIRL:AIM) 82p
aging with underlying sales in the has developed a successful niche in the Market value: £98.1 million
year ending January up 16.4%. The marketplace with a growing emphasis This year’s EPS growth: 251.9%
company is a beneficiary of the on fine wines. The reduction in the Next year’s EPS growth: 51.3%
increased popularity of the internet, minimum order to six bottles has The South American miner is beat-
which accounts for an increasing pro- attracted new customers. At 413.3p ing gold production targets at its
portion of sales. Last July it institut- and, based on forecast earnings per Corihuarmi mine and thereby pro-
ed a ‘strategic review’ , which may share of 21.3p this year, the viding additional funds to advance
yet result in a bid. (JM) price/earnings ratio of 19 is rich but its exploration projects. The forecast
THE WRITER HOLDS SHARES IN THIS COMPANY justified by the growth prospects. (JM) earnings growth will be driven solely
THE WRITER HOLDS SHARES IN THIS COMPANY by Corihuarmi until late 2012 when
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100211 p14-22 Cvr story 8/2/11 3:51 pm Page 22
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The doors are about to open on the fast food success story’s newest country
DP POLAND
FTSE AIM SS TRAVEL & LEIS £
appointed Shaw as chief executive officer
and financier-to-leisure expert Nick
Donaldson as chairman.
Poland is seen as an ideal market in
which to launch Domino’s Pizza, as there
74 Rebased to first
Shares believes to be oversold follow- is growing demand for consumption of
72
ing the death of chairman Richard 70
pre-prepared foods, including takeaways
Worthington in October 2010. 68 and home delivery restaurant food. In its
The company has the master franchise 66 initiation of coverage note on DP Poland
for Domino’s Pizza in Poland and will 64 in June 2010, stockbroker Seymour
62
make its debut in Warsaw, expected to Pierce calculated the Polish pizza market
60
happen in late February. It joined Aim on to be worth £143 million, potentially ris-
58
28 July 2010, led by Worthington and ing to £346 million within ten years. This
56
executive director Peter Shaw – both of 54
implies 9% compound annual growth.
whom built up Coffeeheaven into a suc- AUG SEP OCT NOV DEC JAN Shares says: Overlooked since the
Source: Thomson Datastream
cessful coffee chain in Central and chairman’s death, the maiden store
Eastern Europe (predominantly Poland), Having listed at 50p, DP Poland hit a opening should reignite the share price.
prior to its acquisition by Whitbread peak of 73.5p in September 2010, only to Buy. C
(WTB) for £36 million in February 2010. lose all of its gains upon Worthington’s THE WRITER HOLDS SHARES IN WHITBREAD
London commercial property group occupancy yet to reach key level million is up for renewal with
Royal Bank of Scotland (RBS) in
Workspace making slow progress 2012. Workspace would therefore be
negatively impacted were interest
rates to rise.
Chris Menon The company, whose properties are
P
roperty play Workspace (WKP: ter to 84.4%, with like-for like occu- located in London, is trying to realise
AIM) should be sold as progress pancy (that is properties whose use value by way of refurbishments and
towards increasing occupancy was not changing) up 0.9% to 86.6%. changes of use. But such work will be
to a level that will deliver meaningful Rents rose by 0.5%. costly and the benefits will take some
rental growth remains slow. This is well above the low point in time to come through. Workspace has
The provider of space to small and overall occupancy in March 2008 of a also gone to the market to raise funds
medium-sized businesses last week (2 shade under 83% but below a level, twice in the past two years and only
Feb) produced a muted interim man- estimated at 90%, whereby meaningful an optimist would bet against it hav-
agement statement for the period from rent increases can be made to stick. In ing to do so in the future.
1 October 2010 to 2 February. Overall addition, the company is carrying Shares says: There is better value
occupancy advanced 1.2% in the quar- £383 million in debt, of which £150 elsewhere. Sell at 25p.
Travel group is ready for Canadian expansion and a new stab at the UK
Dan Coatsworth
rowing propensity among year earlier. This was caused by a £12.2 sales of European holidays to Canadians
Martin Pring
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AMINEX (LON)
FTSE AIM SS OIL & GAS £
20 Rebased to first
18
16
14
12
10
6
F M A M J J A S O N D J
Source: Thomson Datastream
TV production company set to beat market forecasts Eros are trading on forward
price/earnings ratios of about 10
DQ to provide prime-time results times next year’s earnings per share
(EPS) forecast. We believe DQ, fore-
cast to increase EPS by 42% next year
Simon Keane from 9.6p to 2012’s 13.7p, deserves a
higher rating. In comparison, Eros is
B
uy Indian production company the pound, that equates to revenues for predicted to expand EPS by 9.8% from
DQ Entertainment (DQ:AIM) as the year ending 31 March of between 21.2p to 23.3p.
its 75%-owned Indian subsidiary £28 million and £29.2 million versus The fourth-quarter is significant for
could beat full-year revenue forecasts. consensus of £27.7 million sales. While DQ in terms of revenues so the market
This is based on comments in a trading we are not bulls of the rupee at present may be waiting for confirmation of
update (4 Feb) from Bombay Stock (see Forex, 3 Feb), potential downside trading for this key period. The com-
Exchange-quoted DQ Entertainment here is more than adequately priced in. missioning of a second series of the
International (DQE:BSE) which The bigger picture is a rating anomaly Jungle Book animation adds confidence
expects to full-year sales to grow by has opened up between the business trading should be at least in line.
17% to 22% and its larger rival Eros International Shares says: Buy ahead of
this year. (EROS:AIM) which could reverse. full-year numbers potentially
At an exchange rate of INR 73.4 to Both the DQ parent company and beating expectations.
FOCUS ON PLUS
Top five risers %
Adriatic Oil (ADOP:PLUS) 60.0
Wessex Exploration (WX.P:PLUS) 43.0
Wheelsure (WHLP:PLUS) 37.8
Metroelectric (METP:PLUS) 33.3
Valiant Investments (VALP:PLUS) 33.3
R
isk-tolerant investors could consider playing That performance was boosted by revenues from a deal with
momentum in oil explorer Wessex Shionogi Pharma for the sale of all US rights to its PSD502 drug
Exploration (WX.P:PLUS), up 43%, as its to prevent premature ejaculation and the licensing of rights to
partner Tullow Oil (TLW) gears up to drill a well off the rest of the world. Revenues have subsequently dropped.
the coast of Guyane in South America. Independent broker finnCap forecasts sales slipped to just £1.2
Wessex has a modest 1.25% stake in the Guyane million in 2010, producing a £1 million loss.
block but the target, the Zaedyus prospect on which This shortfall should only be temporary while Plethora waits for
drilling will commence this quarter, could contain as regulatory approval for PSD502. Clearance should be followed by
much as 700 million barrels of oil or equivalent further milestone payments and a percentage of the royalties from
(boe). A successful discovery would still be material gross sales outside the US. Approval should be in place within a
for the £10 million market cap. year and chief financial officer Ronald Openshaw tells Shares:
The company is also preparing an independent ‘When it does, we’re confident that even on a conservative sales
audit of all of its assets ahead of a mooted move to estimates we could obtain £10 million in annual royalties from this
Aim before the end of March. This could provide a drug with no further costs.’
further catalyst for the share price. Meanwhile the new unit, called The Urology Company, has a
Elsewhere, electric vehicle play Metroelectric portfolio of 11 urology products Plethora is distributing in the UK.
(METP:PLUS) gained 33.3% ahead of share placing (4 This should help diversify its revenue streams away from lumpy
Feb) which raised £80,000 for working capital purposes. milestone payments and potential royalties. FinnCap believes
Shares says: Wessex is a Speculative Buy group revenues will rally 75% to £2.1 million in 2011, while losses
at 5.1p. should come down to £600,000.
With several other late stage drugs for which it is seeking part-
ners the £4.4 million cap could perform strongly over a two-to-three
year horizon, with sustainable profits possible by around 2012-13.
Shares says: A Speculative Buy at 7.9p for the
growth potential.
Visit www.plusquoted.com
Excellence deserves
Nominations now open for the
UK MARKET
AWARDS 2011
STOCK
S
hares is proud to announce the first UK Stock Market Awards. The awards will be
supported by all of the publications and financial information service providers
which form the MSM Media Group, including not just Shares and its sister web-
site www.moneyam.com but also www.stockmarketwire.com, www.directorsholdings.com,
www.brokerforecasts.com, www.plusquoted.com and www.simplychart.com. The awards
will celebrate all that is great about publicly listed British firms and the equity market
within which they choose to operate.
The UK Stock Market Awards will also seek to answer the biggest question of all –
which companies are actively riding the wave and which are simply being swept along
by the surf ? They will identify the firms that are implementing a carefully considered
strategy to properly balance risk with return and create shareholder value. Now is your
chance to have a say, by nominating candidates across all 25 categories. A vastly experi-
enced panel of equity market participants and commentators will then sift your initial
ideas down to the individual winners.
www.stockmarketawards.com
The judging process
What will we be looking for? The panel
The panel will be looking for evidence of: The panel will be chaired by Russ Mould,
• Effective innovation editor of Shares Magazine, who previous-
• Commercial success ly worked for 12 years at investment
• Financial soundness bank UBS as an equity analyst covering
• Clarity of strategy the technology sector. Russ took the role
• Effective implementation of that of lead analyst on several initial public
strategy offerings and reached the level of
• Management acumen managing director in 2003, becoming
head of UBS’ global semiconductor
Ideally the winners’ shares will have research effort. He joined Shares in 2005
performed consistently well during the as technology correspondent and was
year although acquisitions, disposals, appointed editor in July 2008.
restructuring programmes, fund The full panel will include individuals
raisings and the launch of innovative with experience of the fund management
product and service offerings can and broking industries, who work as
all be given special recognition – company advisors, accountants and
especially if a firm’s share price has lawyers as well as individuals with direct
responded favourably. experience of running PLC companies.
recognition
A
fter a huge rally from March 2009’s lows, the FTSE 100 been slimmed down and balance
has reached the 6,000 level once more. Macroeconomic sheets’ cash piles replenished. The
data remains volatile from month to month and con- first UK Stock Market Awards will
cerns regarding inflation and whether it will force interest rate recognise those firms and execu-
increases in the West to match those already seen in markets tives who are doing the most to
as far afield as Australia, South Korea, China, Israel and Brazil grab the opportunities on offer to
have yet to play out. But what is clear is that after two years of advance their profits and
restructuring and adaptation to a tougher environment, corpo- strategic positioning.
rations are back on the front foot once more. Cost bases have Merger and acquisition activi-
ty continues apace, while initial
public offerings (IPOs) also con-
AWARDS CATEGORIES tinue to reward investor atten-
Our awards will be sector based using the industry tion. In 2010, 89 firms went
standard ‘Super Sectors’. This will ensure that public on the London Stock Exchange and raised over
£10 billion between them, compared to 22 deals and £1.5 bil-
comparisons of performance, management
lion the year before. This rejuvenation of the IPO market
challenges and sector conditions will be more should continue in 2011, both on the Main Market and Aim,
meaningful and provide realistic and direct compar- and reaffirm London’s position as the place to list.
ison for companies against their peers, rather than The UK’s fourth-quarter economic wobble, when gross
just the market’s highest-performing sector. domestic product actually fell 0.5% quarter-on-quarter, is a
timely reminder no firm is in for an easy ride at any time. But
1 Best Oil & Gas PLC the UK Stock Market Awards will give due recognition to
2 Best Chemicals PLC those companies which are rising to the challenge and reward-
ing their shareholders with capital appreciation and also
3 Best Basic Resources PLC
potentially increased dividend payments.
4 Best Construction & Materials PLC
5 Best Industrial Goods & Services PLC
6 Best Automobiles & Parts PLC AWARDS TIMINGS
27 Jan – Open for nomination
7 Best Food & Beverage PLC
21 Feb – Closing date for nominations
8 Best Personal & Household Goods PLC 04 Mar – Judging panel meet to vote on the nominations
9 Best Health Care PLC 31 Mar – Awards held at prestigious London venue
10 Best Retail PLC
11 Best Media PLC
12 Best Travel & Leisure PLC FURTHER INFORMATION
13 Best Telecommunications PLC To nominate a company in these awards please visit
14 Best Utilities PLC www.stockmarketawards.com
To discuss sponsorship or any other involvement in
15 Best Banks PLC
the awards please contact Richard Collins on
16 Best Insurance PLC 0207 378 4404 or rcollins@msm.co.uk
17 Best Real Estate PLC
18 Best Financial Services PLC
19 Best Technology PLC In partnership with
20 Best Investor Relations Communications
21 Best Advisor – Corporate Sponsor
22 Best Advisor – Legal
23 CFO of the Year
24 CEO of the Year The Quoted
25 Deal of the Year Companies Alliance
Follow director sales after shares rally Finance chief buys following full year results The Trade
almost 20% in a week Buyer: Simon Dingemans
Follow director
ARM Glaxo purchase
Consideration: £472,000
Number of shares bought: 40,000
Subsequent holding: 40,000 (0.0008%)
overextended Chris Menon
costs, notably those related to its con-
troversial diabetes drug Avandia. The
F
Simon Keane ollow the move of product has been removed from
echnology investors might like to GlaxoSmithKline (GSK) chief Europe after claims it increased the
we also note chief financial officer Tim Company Director Position Date Price Amount Value Holding Current
(p) (£) (No. of shares) price (p)
GlaxoSmithKline Simon Dingemans CFO 04/02/11 1,180.0 40,000 472,000 40,000 1,184.0
The Trade Gulfsands Petroleum
De La Rue
Andrew West
Nicholas Brookes
CH
CH
03/02/11
31/01/11
319.0
670.0
100,000
29,628
319,000
198,508
100,000
37,408
319.0
693.0
Seller: Warren East, chief executive officer Jelf Grahame Stott NED 01/02/11 65.0 250,000 162,500 250,000 65.5
Consideration: £1,666,601 Gulfsands Petroleum David Cowan NED 03/02/11 310.0 50,000 155,000 491,750 319.0
National Grid John Parker CH 02/02/11 549.5 20,000 109,894 134,712 554.5
Number of shares sold: 290,000 SABMiller John Manser NED 02/02/11 2,083.8 5,000 104,191 5,000 2,086.5
Subsequent holding: 714,279 (0.05%) De La Rue Tim Cobbold CEO 31/01/11 670.0 14,813 99,247 14,813 693.0
De La Rue Colin Child FD 31/01/11 670.0 14,813 99,247 14,813 693.0
easyJet Chris Kennedy FD 04/02/11 385.0 6,490 24,987 12,631 396.2
Score’s disposal of £1.1 million worth of
stock. His decision to part with 197,250 OPTIONS EXERCISED
shares at 581.5p, reducing his holding by Company Director Position Date Price Amount Value Holding Current
(p) (£) (No. of shares) price (p)
70% to 86,053, adds to our conviction levels Gulfsands Petroleum Andrew West CH 03/02/11 129.0 200,000 258,000 200,000 319.0
about the Cambridge firm’s valuation. Gulfsands Petroleum David Cowan NED 03/02/11 146.0 125,000 182,500 566,750 319.0
Porvair Ben Stocks CEO 02/02/11 98.0 150,000 147,000 153,185 123.5
The share sales came on the heels of Porvair Christopher Tyler FD 02/02/11 98.0 100,000 98,000 139,000 123.5
Eurasia Mining Gary Fitzgerald NED 02/02/11 1.0 6,491,308 64,913 15,326,994 1.5
very strong fourth-quarter numbers (1 Porvair Christopher Tyler FD 02/02/11 101.5 60,000 60,900 199,000 123.5
Feb) which prompted a 17.1% one-week Eurasia Mining Michael Martineau CH 02/02/11 1.0 5,567,600 55,676 12,618,025 1.5
Whitbread Christopher Rogers FD 01/02/11 1,734.6 2,129 36,930 47,976 1,758.0
climb from 516p. The £7.8 billion cap Whitbread Patrick Dempsey ED 01/02/11 1,734.6 2,129 36,930 24,957 1,758.0
Eurasia Mining Christian Schaffalitzky MD 02/02/11 1.0 3,000,000 30,000 15,911,168 1.5
reported its highest ever group order
backlog as of 31 December, up 75% on TOP SELLS
Company Director Position Date Price Amount Value Holding Current
the previous year. (p) (£) (No. of shares) price (p)
While the figures prompted across-the- ARM Warren East CEO 03/02/11 574.7 290,000 1,666,601 714,279 607.5
board earnings upgrades investors must ARM Tim Score CFO 03/02/11 581.5 197,250 1,147,009 86,053 607.5
ARM Tudor Brown ED 03/02/11 580.1 189,860 1,101,397 736,045 607.5
now ask themselves whether the technolo- Andor Technology Chris Calling ED 02/02/11 460.0 100,000 460,000 172,750 463.0
gy play has too rich a rating. ARM trades Experian David Tyler NED 31/01/11 772.5 50,000 386,250 345,455 790.0
Noventa Erik Kohn CH 04/02/11 12.8 1,000,000 128,037 5,441,629 12.8
on a price/earnings (PE) ratio of 57.5 based Imperial Innovations Susan Searle CEO 31/01/11 350.0 24,012 84,042 67,800 435.0
Imperial Innovations Julian Smith FD 31/01/11 350.0 18,860 66,010 39,219 435.0
this year’s consensus earnings per share Kiotech International Richard Scragg ED 03/02/11 84.0 50,000 42,000 238,588 86.5
Imperial Innovations Martin Knight CH 31/01/11 350.0 8,348 29,218 100,640 435.0
(EPS) estimate of 10.5p.
This looks very full even though, EPS TOP SELLS POST EXERCISE
growth of 11% is expected for 2011 and Company Director Position Date Price Amount Value Holding Current
(p) (£) (No. of shares) price (p)
20% for 2012, with the prospect of more Gulfsands Petroleum Andrew West CH 03/02/11 310.0 200,000 620,000 0 319.0
to come as margins are driven higher by Gulfsands Petroleum David Cowan NED 03/02/11 307.0 125,000 383,750 441,750 319.0
Porvair Christopher Tyler FD 02/02/11 123.0 145,500 178,965 53,500 123.5
increased royalty rates. The firm may Porvair Ben Stocks CEO 02/02/11 123.0 135,500 166,665 117,685 123.5
City of London Investment Douglas Allison FD 02/02/11 440.0 10,000 44,000 414,375 446.8
also penetrate new markets. Back in ARM Tudor Brown ED 03/02/11 577.5 2,091 12,076 925,905 607.5
January Microsoft (MSFT:NASDAQ) ALL DATA ALSO AVAILABLE AT
CEO Steve Ballmer announced his firm’s WWW.SHARESMAGAZINE.CO.UK/SHARESDIRECTORDEALS
Windows 8 operating system for desktop Highlighted companies are featured in stories in this week’s magazine
computers would be designed to incorpo- CD commercial director CS company secretary MKD marketing director
rate ARM’s intellectual property. CEO chief executive officer D director NECH non-executive chairman
CED chief executive of division DCH deputy chairman NED non-executive director
Shares says: ARM is a great company CFO chief financial officer ECH executive ch OD operations director
KEY
but a lot of good news now appears CH chairman ED executive director SD sales director
COO chief operating officer FD finance director SEC secretary
discounted. Sell.
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100211 p32-33 Feature.qxd 8/2/11 11:02 am Page 32
Historic comparison of the yield on shares and gilts offers further encouragement to bulls of the market
14
12
10
0
1981 1983 1985 1987 1989 1991 1993 1995
Punchy profits than the historic equity yield and just and cash flows are booming and balance
Since the first piece the FTSE All- 29 basis points, or 0.29% than the sheets cash rich. This does suggest UK
Share has soared 57% from 1,984.2 to prospective dividend yield available equities remain good value, relative to
3,109.5 and since the second it has from the benchmark index. government bonds, even after the rally
chalked up a 10.1% gain, in a clear val- Were the differential to return to its from the March 2009 lows.
idation of our approach. position of ten years ago, assuming a
The inevitable result of such stellar static bond yield and no increases in Bond downside
gains is the ten-year bond yield has company dividends, it would imply a Beyond the historical evidence, there
moved some way ahead of that of the move of 418% in the FTSE All-Share’s are three main reasons why we would
FTSE All Share, since equity yields to 16,027.4. Such a scenario is clearly expect the blowout in bonds to contin-
decline as prices rise, just as is the case unrealistic, not least as the UK equity ue. First, almost every potential pur-
for bonds. Yet the level of divergence still market back in 2001 was still gripped chaser of bonds is already in the mar-
looks very small on a historical basis. In by the technology bubble, which rash- ket – fund flows indicated how they
February 1981, at around the time the ly threw conventional valuation tech- were the consensus call in 2010.
multi-decade bond rally began, the yield niques such as this out of the window. Second, sovereign debt liabilities are
on the UK ten- year gilt, at 13.2%, was It may therefore not be the most sen- now so large there must be some doubt
seven hundred basis points (7.0%) ahead sible benchmark for comparison. about some nations’ ability to pay back
of the yield on the All-Share. As recently Yet even a return to the average pre- their debts. Finally, a loose monetary
as February 2001 the gap stood at 320 mium over the last ten years, of 130 policy in the developed world is likely
basis points. basis points, would suggest a 17% to boost inflation, further reducing the
upward move in the FTSE All-Share to attractiveness of fixed-income assets
Equity upside 3,606.2 – and that assumes the unlikely as an investment as rising prices
At the time of writing, ten-year gilts prospect of dividend payouts staying reduce the value of the coupon – or
yield just 90 basis points, or 0.9%, more flat at a time when corporate profits yield – on offer in real terms. ■
26 Mar '09 –
Shares says
buy the
market
Radical changes to its end markets have forced the printer to acquire new skills
F
St Ives’ chief executive officer Patrick Martell (left)
mid-1980s St Ives (SIV) became and finance director Matt Armitage
one of the biggest names in UK
commercial printing. Today it is
one of the few legacy figures left in a
print industry fighting to stay alive.
Given the surprise £12 million acquisi-
tion in June 2010 of marketing services
business Occam, I ask chief executive
officer (CEO) Patrick Martell if St Ives
has no choice but to enter a market in
which it has no experience because sev-
eral parts of its existing business are,
arguably, in near-terminal decline.
‘Yes, that is one reason, but there is
logic behind buying Occam,’ says Martell.
He says there are close links between the
two businesses: Occam builds databases not profit and the strategy appears to have been hit by lower prices and some
so companies can tailor their marketing have worked. St Ives has subsequently structural changes yet we are combat-
messages to the correct target market. St paid down a lot of debt. It also claims its ting those two challenges by bringing in
Ives prints the marketing literature businesses are now running more effi- business. We have seen our efforts to
which is sent to these people. ciently while the cash keeps coming in. win new business in the last six months
I argue this is still a bold leap for St On the day that I meet Martell and reverse what was an overall decline in
Ives, since it has no skills in database finance director Matt Armitage, rumours revenue.’
management. ‘That is why we’ve gone circulate there is a new round of redun- St Ives says it cannot stand firm on
into the market through an acquisition dancies coming at the company, this time pricing as this could see it lose business
and thus bought the skills,’ says the focused on the books division. I put it to to rivals – as witnessed in March 2010
CEO, defensively. the pair the business is clearly not out of when its lost a contract for printing
If it is such a logical fit, I ask the CEO the woods yet if it is having to further cut IPC’s magazines to a rival which under-
why such an acquisition has not been costs. ‘It is true that we are cutting jobs in cut on price. ‘The issue with magazine
done before. ‘I suppose the impetus to do the books business but these are only a printing is that capacity exists in expen-
it was new management including a new small number of voluntary redundancies,’ sive, well-built, long-lasting machines –
CEO and the change in economic cli- replies the CEO. ‘There are parts of that against a backdrop of relatively easy
mate,’ he replies. ‘We are good at the exe- operation which are now automated so we finance which has seen these assets refi-
cution of marketing services so it is not so need fewer people.’ nanced through various cycles, so the
much of a leap for us.’ Armitage says the company will con- assets have lived longer than contribu-
tinue to look at ways of trimming costs tion in that period should allow them to
New broom including further staff reductions in do. At some point those assets will need
Martell became CEO in April 2009 after businesses that have seasonality, as to be replaced but most (printing compa-
a management reshuffle which saw his they can be ‘manned up and down’ nies) aren’t generating sufficient cash to
predecessor Brian Edwards and com- when necessary. reinvest or even survive.’
mercial products managing director Martell insists St Ives’ assets are in
Simon Ward leave the company. This Price pressure good shape and it continues to generate
was a difficult period for St Ives, charac- St Ives’ trading update (30 Nov ‘10) lots of cash to support the business. ‘If you
terised by a severe profit warning and implied the rate of decline in sales was have all that money invested into capital,
job cuts across the business. slowing. Nonetheless, I put it to Martell the short-term argument is to keep print-
The company closed down several pro- he is working in what remains a difficult ing, even if it is not going to make you a
duction plants and sold its US and Dutch market. Talk in the publishing industry profit. It just needs to contribute towards
operations. ‘When we were talking to is printing prices continue to fall as costs. That is the view many printers have
investors, they weren’t talking about capacity outweighs demand. Companies taken which is why printing prices in the
strategy, they were talking about survival,’ including St Ives have spent millions of market continue to go down.’ But what
admits Martell. ‘We took out units which pounds on machines they cannot afford about longer term, why would St Ives want
didn’t, or would soon not, generate cash.’ to leave sitting idle. ‘The price pressure to operate in a potentially zero-margin
He says the company’s focus was on cash remains very severe,’ he admits. ‘Sales environment? Martell believes the com-
have also seen number of pages go up. tions. While its new focus of marketing 110
Some companies are even spending services may seem a stretch too far – and
100
more money to make it almost a piece of further acquisitions are planned includ-
90
marketing literature.’ ing field marketing, research and evalu-
Armitage insists the music and ation – Martell remains firm St Ives can 80
accounts printing businesses are only a adapt. ‘We are focused on the execution 70
small part of St Ives and any further and delivery of marketing campaigns. 60
decline in sales can be addressed. ‘They We already have relationships with large
50
are currently generating profit and cash. companies that take our print, so we
40
If they don’t do that, we will have to take hope our widening skills will help sell F M A M J J A S O N D J
action – sell or close them.’ more services to these clients.’ ■ Source: Thomson Datastream
The concept of the equity risk premium is back in vogue as the Arab world sees further unrest
Sector report The complete guide to investing in... FOOD & DRUG RETAILERS
FTSE ALL-SHARE
SECTOR PERFORMANCE
DATA SINCE 1 JANUARY 2011 %
The strong
1.
2.
3.
4.
Technology Hardware & Equipment 23.1
Life Insurance
Mobile Telecommunications
Oil & Gas Producers
9.5
6.6
6.6
get stronger
5. Banks 6.1
6. Nonlife Insurance 5.6 John Marshall
ising crop prices, pricing pressure are down by some 2%. The market appears to
R
7. General Industrials 4.7
8. Health Care Equipment & Services 4.4 from discounters and sagging con- have polarised with discounters such as Aldi
9. Software & Computer Services 4.1 sumer confidence all look like and Lidl performing well. In the past 12
10. Construction & Materials 4.1 strong headwinds for the Food & weeks, Aldi’s market share has increased
11. Electronic & Electrical Equipment 4.1 Drug Retail sector, but history shows they are from 2.9% to 3.1% and Lidl’s from 2.2% to
12. Media 3.1 all surmountable. 2.4%, according to research firm Kantor.
13. Oil Equipment, Services & Distribution 2.5 First, the supermarkets’ muscle means the Asda, Tesco and Morrison are therefore all
14. Financial Services 1.6 bulk of the pain caused by higher ingredient desperately trying to reverse the discoun-
prices is traditionally felt by their suppliers ters’ charge. Although Sainsbury was one of
FTSE All Share 1.5
and the Food Producers sector – the chains the winners over Christmas, when it suc-
15. Forestry & Paper 1.3
are experts are maintaining margins even ceeded in becoming the industry’s number
16. Aerospace & Defense 0.9
during periods of rising input prices. Second, two, January was a less happy month.
17. Personal Goods 0.5
consumer confidence is ebbing, yet this could
18. Industrial Metals & Mining 0.5 FTSE ALL-SHARE
simply lead to a repeat of 2009’s trends FTSE ALL-SHARE FD & DRUG RTL
19. Support Services 0.3
toward eating out less and in more and FTSE ALL-SHARE FD PRODUCERS
3200 Rebased to first
20. Alternative Energy 0.1
greater demand for what are, for the big gro-
21. Fixed Line Telecommunications -0.2 3100
cers, higher margin own-label brands. Finally, 3000
22. Equity Investment Instruments -0.2 the major groups are tackling the discounters 2900
23. Industrial Transportation -0.3 head on and their aggressive physical expan- 2800
24. Real Estate Investment Trusts -0.5 sion plans should erode the market share of
2700
25. Real Estate Investment & Services -0.8 smaller rivals.
2600
26. Household Goods & Home Construction-0.9 As a result we believe the grouping will
2500
27. Food & Drug Retailers -1.9 start to show improved price momentum as
2400
Drug Retailers the market’s fears prove unfounded. Our pre-
2300
Food Retailers & Wholesalers ferred picks are the more value-conscious F M A M J J A S O N D J F
Source: Thomson Datastream
28. Gas, Water & Multiutilities -2.2 supermarket pairing of Morrison (MRW)
29. Mining -2.3 and Tesco (TSCO). We would avoid FTSE ALL SHARE FD & DRUG RTL
30. General Retailers -2.3 TESCO
Sainsbury (SBRY) on valuation grounds and
MORRISON(WM)SPMKTS.
31. Chemicals -2.4 are concerned confectioner Thorntons SAINSBURY (J)
6000 Rebased to first
32. Beverages -2.5 (THT) is still hamstrung by structural
5800
33. Travel & Leisure -2.7 challenges it is proving unable to address.
5600
34. Pharmaceuticals & Biotechnology -4.2
5400
35. Tobacco -4.2 Rising to the challenge
5200
36. Food Producers -4.5 The Big Four of Asda, Morrison, Sainsbury
5000
37. Electricity -5.1 and Tesco will have to flex their muscles
4800
38. Industrial Engineering -7.3 again in 2011. Underlying sales at the begin-
4600
39. Leisure Goods -12.2 ning of the year have been disappointing for
4400
40. Automobiles & Parts -12.8 the sector as a whole. Broker Jefferies
4200
SOURCE:THOMSON DATASTREAM 02 FEB 2011 International estimates like-for-like revenues F M A M J J A S O N D J F
Source: Thomson Datastream
The counter attack by Asda, Morrison sentiment will hit the sector’s perform- 5600
and Tesco against the discounters has ance significantly. During the recession
5400
led to an increase in the amount of price there was anecdotal evidence home
5200
activity with promotions accounting for entertainment became more popular
5000
38% of transactions. Much of the price with ‘eating in becoming the new eat-
cutting has been financed by the unfor- ing out’. That should be good news for 4800
tunate food processors. In the short those food retailers such as Marks & 4600
term this can only get worse. Spencer (MKS) and Waitrose who 4400
F M A M J J A S O N D J
The problems this can cause were emphasise quality as much as price. In Source: Thomson Datastream
demonstrated by the recent collapse of addition the woes of Headland show it Consensus
Headland Foods, which was one of two is the food processors who get squeezed
main manufacturers of own-label frozen by rising ingredient costs, not the big Total broker Buy ratings on stocks: 26
prepared meals. All commentators are retailers. The chart (page 38) shows Total broker Hold ratings on stocks: 19
Total broker Sell ratings on stocks: 11
Sector report The complete guide to investing in... FOOD & DRUG RETAILERS
19 Jan
26 Jan
02 Feb
So far neither Morrison nor Marks &
5 Jan
A
MORRISON (WM) SPMKTS.
the roll-out of convenience FTSE ALL SHARE FD & DRUG RTL £ sition, although initial progress is more
stores and an improved online 320 Rebased to first likely with convenience stores.
offering should all revive earn- 310 Meanwhile the Bradford firm will
ings growth and share price performance 300 increase its sales area by some 5% in
at Morrison (MRW). An update from 2011-12, helped by the acquisition of 16
290
chief executive officer (CEO) Dalton former Netto stores from Asda. The £7.3
Phillips next month (10 Mar) alongside 280 billion cap is also making better use of its
full-year results could help the stock 270 existing space by rationalising ranges and
shake off its torpor. promotions. This should enable the group
260
After three stellar years, Morrison’s to increase the importance on non-food
more recent performance has been 250 F M A M J J A S O N D J where it lags its main competitors. In
Source: Thomson Datastream
rather pedestrian. Physical expansion food, Morrison’s historic emphasis on
last year was a mere 3% and like-for-like sales growth decel- ‘value’ should be helpful in view of the risk of a decline in
erated. CEO Phillips has set out to restore momentum via the consumers’ living standards.
development of convenience stores and online shopping. A At 265p the shares trade on a prospective price/earnings
clothing experiment with Peacocks has also been extended as ratio (PE) of 10.5 times for 2011-12, which looks decent value.
Morrison has pushed its non-food offer. The CEO is promis- THE WRITER HOLDS SHARES IN THIS COMPANY
O C
ver the past decade retail behemoth Tesco (TSCO) hocolatier Thorntons (THT) continues to struggle with
has transformed itself from being a company with seasonality of demand and the cannibalisation of its
a strong UK bias to one with a strong international own stores’ sales by business generated through the
presence. In addition, the brand is being extended to supermarkets. Until these structural challenges have been
include banking, insurance and telecoms. We would expect properly addressed the shares should be avoided.
this strategy to continue and be a further boost to growth. Last month’s (13 Jan) Christmas trading statement perfectly
As such we find the valuation discount to rival Sainsbury encapsulated the Derbyshire firm’s problems. Although sales of
(SBRY) baffling, and believe Tesco’s 12.1 times prospective the Thorntons brand increased the mix of business was unhelp-
price/earnings ratio (PE) is too low relative to its peer’s ful with higher sales through supermarkets and lower revenues
14.7 times multiple. from its own stores, where like-for-like sales fell 5.9%. That was
Tesco now generates 16% of its revenues from Europe and the third straight decline during the key festive selling period.
15% from Asia. It is strongly committed to the emerging This looks to confirm how the increased emphasis upon sales
economies of Central Europe rather than the mature economies through supermarkets is eroding business done through the
of Western Europe. The success of this strategy was demon- group’s own venues, which are also suffering from inadequate
strated over Christmas when international sales grew 14.2%, investment over the past three to four years. In the longer term
compared with much more modest growth in the UK. New chief this changing mix of business threatens to hit margins as super-
executive officer Phil Clarke has underlined his commitment to markets tend to be demanding customers.
Asia by appointing the first chief executive Asia. A strong seasonal bias in business to gift occasions such as
Despite the promise of its European and Asian expansion Christmas, Easter, Valentine’s Day and Mothering Sunday also
its US venture, Fresh and Easy, has admittedly been less than creates difficulties for both the stores and Thorntons’ factory.
successful. It lost £165 million last year. Tesco has said the Peaks and troughs in demand cause production problems for the
US will move into £66 million cap, while
profitability in TESCO the highly rented THORNTONS
FTSE ALL SHARE FD & DRUG RTL FTSE ALL-SHARE FD & DRUG RTL
2012-13, helped 460 stores suffer from 130 Rebased to first
Rebased to first
by strong sales 450
inadequate sales over
120
growth. Were 440 much of the year.
it not to do so, 430 In the medium term 110
Clarke is unlikely 420 Thorntons will seek to
to tolerate 410
reduce the size of its 100
ongoing 400
retail estate, but sup- 90
losses for long. 390
plying supermarkets
THE WRITER HOLDS 380
can be hazardous as 80
Nikkei 225
10,592 EUR/INR
ast November’s break above a major bear trend 61.89 SELL
4/12/00 Jul '02 Jul '03 Jul '04 Jul '05 Jul '06 Jul '07 Jul '08 Jul '09 Jul '10 Jul 21/4/11 16/7/08 Oct '09 Apr Jul Oct '10 Apr Jul Oct '11 4/3/11
www.sharescope.co.uk Chart (c) Share Scope www.sharescope.co.uk Chart (c) Share Scope
* FTSE All-Share comparative performance is from the start of each technical trade until present or when profit is taken/stopped out. Portfolio runs
on a 12-month rolling basis. In the past 12 months the FTSE All-Share is up by 17.9%. By asset class the Chartist’s returns are as follows: stocks
+10.4%, indices -0.4%, commodities -0.5% and currencies -0.9%. Buy calls have recorded an average 9.1% gain and sell/short calls a 2.4% loss.
42 Shares | 10 February 2011
100211 p42-43 chartist 8/2/11 10:14 am Page 43
RSA Aminex
700 50
600 45
550
500 40
450 35
400
30
350
300 25
250
20
200
15
150
10
100
ACTUAL
ACTUAL
50-DAY MOVING AVERAGE (M1)
50-DAY MOVING AVERAGE (M1)
50
200-DAY MOVING AVERAGE (M2)
5 200-DAY MOVING AVERAGE (M2)
6/1/94 Jul '95 Jul '96 Jul '97 Jul '98 Jul '99 Jul '00 Jul '01 Jul '02 Jul '03 Jul '04 Jul '05 Jul '06 Jul '07 Jul '08 Jul '09 Jul '10 4/3/11 18/10/99 Jul '01 Jul '02 Jul '03 Jul '04 Jul '05 Jul '06 Jul '07 Jul '08 Jul '09 Jul '10 Jul 4/3/11
www.sharescope.co.uk Chart (c) Share Scope www.sharescope.co.uk Chart (c) Share Scope
Peninsular to
bounce back
Dan Coatsworth
he 9% dip in Peninsular had to be cleared to accommodate a pared to the current 18,000 ounce rate.
$ / € – Summit confusion
EDITED BY RUSS MOULD
Russ Mould
hile last Friday’s (4 Feb) non-farm payrolls data may is growing and while corporate profits
W have disappointed some, at least the trend remain robust the prospects for more job addi-
remained positive, in stark contrast to the confu- tions should improve. A figure of 60.4 on the US
sion sown by both last week’s (3 Feb) European manufacturing ISM purchasing managers’ index, the highest level
Central Bank (ECB) meeting and the European leaders Brussels seen since May 2004, also read well, while the 68.8 score on the
summit (4 Feb). Shares is therefore happy to maintain its contrar- Chicago PMI was the best number for that indicator since 1988.
ian stance and sell the euro against the dollar at $1.3600, despite The signals from Europe were much less clear. ECB president
our long-term reservations over the greenback’s true worth. Jean-Claude Trichet confused euro bulls by arguing the spike in
News that 36,000 new jobs were created during January in inflation was simply commodity inspired and would be suitably
America substantially undershot the con- transitory. As a result, he suggested, rates of
sensus forecast of 145,000 and again US $ TO EURO (GTIS/TR) 1.0% remained appropriate, disappointing
EXCHANGE RATE
1.45
proved a less positive number than the those who expected a more hawkish stance. In
preceding ADP survey, which had flagged 1.40 addition the Brussels summit failed to find any
the addition of 187,000 new posts against accord on the Franco-German plan for a more
Street estimates of 140,000. A drop in US 1.35 cohesive, pan-European economic policy.
unemployment to 9% helped soothe the 1.30 German plans to raise retirement ages, har-
markets and boost the dollar, even if the monise tax rates and limit government borrow-
decline in the joblessness rate was as 1.25 ing capacity across the eurozone got a big
much due to a statistical anomaly given 1.20 thumbs-down from several European Union
the size of overall labour market had members. Two further meetings were called for
been revised down. Ongoing job creation 1.15 F M A M J J A S O N D J March in the quest for consensus.
Source: Thomson Datastream
adds to the impression the US economy Shares says: Sell the euro at $1.3600.
T A
he Bank of England’s Monetary fresh upward surge in the
Policy Committee (MPC) meets to Australian dollar against the yen
determine UK interest rates today is interesting from a technical
(10 Feb) and although no change is expect- and fundamental perspective alike.
ed, next week’s Inflation Report will make Currency punters should ride the ongoing
even more interesting reading. Interest rate trend and buy the Aussie against the
expectations continue to climb and sterling should Japanese counter at ¥83.46.
therefore be bought against the euro at €1.1880, as the The ongoing turmoil in Egypt and the Middle East has
European Central Bank is likely to hold the cost of borrow- pressured the prices of several commodities higher, most
ing on the continent at 1.0% for some time to come. notably oil and cotton. While Australia is not a big player in
Bulls of the pound have been on the ropes since the oil it is the globe’s seventh biggest producer of cotton and
Office for National Statistics unveiled a 0.5% drop in UK an even greater beneficiary of ongoing strength in iron ore,
gross domestic product for the fourth quarter of 2010 (25 coal and copper, to name but three. This is in marked con-
Jan). Yet the data suggests this estimate could be revised trast to Japan, which is a net importer of almost all com-
upwards or at the very least the first quarter of 2011 will modities and foodstuffs. It is therefore a likely victim if
see a very strong rebound. January’s reading for the UK unrest in the Middle East persists and drives commodity
construction purchasing managers’ index (PMI) surged prices higher still amid concerns of supply blockages,
back to 53.7 from December’s sub-50 mark while the whether they are appropriate or not.
CIPS/Markit services PMI rose to an eight-month high of Nor did the Reserve Bank of Australia’s decision to leave
54.5. After the marked decline in services and construction rates on hold at 4.5% last week (1 Feb) do anything to
activity during the final quarter of 2010, a recovery here dampen market expectations of further hikes this year. The
suggests the early readthrough for the UK economy in 2011 central bank increased its gross domestic product forecast
is much more encouraging. for 2011 from 3.75% to 4.2%.
Shares says: Buy the pound at €1.1880. Shares says: Buy the Aussie dollar at ¥83.46.
Feature – Isas
The April Isa deadline is looming large and canny investors should be looking to take advantage
A world of choice
s we approach the April tax issued by governments of other coun- a self-select ‘Trading Isa’, investor centre
ely
ISA portfolio that’s
iqu
un red tailo to you?
f traders do
Sel in th e s to c k market an
d enjoy th
don’t w a n t
e
a
to invest . But you
You want o f a n IS A
nt benefits
tax-efficie ’ p o rt fo lio.
fits a ll ISA
‘one size t Shares
n a self-selec Fs,
ke you?
en o p e nds to ET
Sounds li ro m s h a res and fu o w
e. F dh
h Selftrad , when an
today wit , y o u d e cide where o r y o ur
bonds an
d gilts can tail
in v e s te d. So you o u th ink
ey is at y
your mon lu d e in v e stments th
to inc
portfolio return.
the best
will yie ld ows, there
ry s e lf trader kn a
, as e v e An ISA is
Of course s to b e a r in mind. e r- te rm
thing r long
are a few
£10,680 p e r d e signed fo ll as
Win up to
nt wra p nts can fa
ba c k tax-efficie lu e o f investme a n
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Open an ISription. investing get back
s e a n d you may d epend on
c ri d
your subs e for terms. well as
le s m a y c hange an
not provid
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it ted. Tax ru ade does
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nt ad v
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the selftraders. O
Join de.co.uk/
isa1
.selftra
Visit www 0700 720
5
or call 084
Lines are open Monday to Friday 7.45am – 7pm. Calls may be recorded. Selftrade® is a trading name of Talos Securities Limited and registered trade mark of Boursorama. Talos Securities Limited is
incorporated in England and Wales (Registration No. 4196325, Registered Address: Boatman’s House, 2 Selsdon Way, London E14 9LA), is authorised and regulated by the Financial Services Authority
(FSA Register No. 208271) and is a member of the London Stock Exchange and PLUS Markets plc.
Feature – Isas
basic execution-only services have come cheaper option in the shape of a regular management fees vary, starting typically
down markedly. There are now several investment Isa. This allows you to buy at 1% and reducing for larger portfolios.
Self-Select Isas available without annual smaller quantities of shares or funds on a But while discretionary services tend
fees, which means you just pay the deal- monthly basis. to be the domain of larger investors, it
ing charges. Brokers such as Halifax Share Dealing, does not necessarily follow that every-
For those thinking of switching holdings TD Waterhouse and The Share Centre one with a sizeable Isa portfolio should
from existing Isas, Justin Modray, an offer accounts where they amalgamate all opt for this route.
IFA and investment specialist at the requests to buy each share and then Stephen Barber, an independent adviser
Candidmoney.com, warns of potential pit- buy in bulk so that share-dealing costs are to provider Selftrade, explains, ‘We have
falls. ‘Beware charges to close your Isa or greatly reduced. many customers who have portfolios of
transfer to another stockbroker, as these well over £200,000 who happily manage
can be steep,’ he says. Taking advice their Isas themselves.
If you do not have the time, the confi- ‘In many ways a portfolio doesn’t get
An eye on the charges dence or the inclination to select your more complex to look after as it gets
Trading commission costs vary widely own investments you might want to bigger – you are still likely to have the
between brokers, but generally the cheap- consider an advisory or even a discre- same weightings of cash, equities,
est way to trade is online execution-only, tionary service. bonds and so on.’
rather than via the telephone. Given the volatility of markets recently, Barber adds, ‘I think those who take the
As with non-Isa deals, stamp duty of has there been a move away from DIY Isas DIY route and build up a sizeable Isa pot
0.5% will apply to any purchases of UK- to advisory or discretionary services? Tim gain trading experience as they progress
listed shares, with other such taxes Whitehead, investment manager at so they see no need to migrate to an advi-
applied by some overseas countries – Redmayne-Bentley, certainly thinks so. sory or discretionary service further down
Ireland, for example has a 1% stamp duty. ‘We continue to see a steady migration the line.’
Check whether the Isa manager you are from self-select to managed accounts,’ he Even investors who prefer to use a dis-
considering imposes other charges. These says. ‘The increased volatility and scope of cretionary broker for the bulk of their
may include a set-up fee, annual account investment possibilities really does sup- investments may run a low-cost execution-
administration fee, management fees, port the use of professional help.’ only self-select Isa themselves and ‘as a
charges for transfers in or contributions, sort of hobby’, says Barber.
cash withdrawal charges, account transfer ‘If you do not
or transfer out charges. There might be a Building a portfolio
charge for reinvesting dividends or for
have the time, the What are the main things to bear in mind
dealing with corporate actions such as confidence or the when planning an Isa portfolio? Modray at
rights issues. Candidmoney.com maintains it is impor-
One of the things that sticks in the craw inclination to select tant to be aware of how much risk you are
of many investors, particularly when they taking and making sure you are comfort-
first get charged, is the ‘inactivity fee’
your own invest- able with that.
levied by some brokers if you do not place ments you might ‘With self-select Isas, like most stock
a trade – buy or sell – within a certain peri- market investments, I'd suggest taking at
od. This may be disguised as an adminis- want to consider least a five-to-ten year view and review reg-
tration fee that is not payable if you do
trade, but it adds up to the same thing.
an advisory or ularly to ensure the holdings remain suit-
able with decent performance potential,’
This is the price you have to pay for low even a discretionary he says.
dealing charges. Brokers will say it costs Martin Bamford, a financial planner
them money to administer an inactive service.’ with Informed Choice, takes a similar
account and there has to be a charge to line. ‘To set your long-term investment
make up for the lack of commission. But Peter Day, a partner at Killik & Co, takes aims you need to know your timescales
there is also an upside as many brokers do a similar line: ‘When markets are going and the preferred value of your invest-
now charge lower commissions to more- up, it is not difficult to make money but ment, at least within a range of possi-
frequent traders. the real skill lies in preserving capital in ble outcomes.
Comparing the charges from different more challenging conditions. During the ‘You need to be realistic when setting
managers for a full-blown Stocks and credit crunch we saw a large pick-up in these goals, so using the typical long-term
Shares Isa built around a portfolio of activity as clients became increasingly returns from different asset classes is a
shares is not easy. One industry estimate aware of the value which an advisory good place to start.
of the admin fees on a £20,000 Isa invest- service can add.’ ‘You should also relate these possible
ed directly in stocks and shares (rather Brokers generally impose minimum returns to interest rates and inflation: you
than funds) as provided by six different investment entry levels – Redmayne- are unlikely to get double-digit investment
leading firms showed a range of zero to Bentley provides a bespoke discretionary returns each and every year in a low inter-
£117.50 a year, including VAT. service for sums of over £50,000 while est rate, low inflation environment. Most
If you are happy to have less control Killik & Co offers a similar service for min- importantly, keep your goals under regular
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Companies Index
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