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Brokers singing along to a bit of Synth Britannia

DATE: Mar, 3   COMMENTS: 0   AUTHOR: Allan Azarola

Synthomer shares soared more than 12 per cent yesterday after the speciality chemicals group revealed that profits were far ahead of market expectations last year.

The FTSE 250 company said that its profit before tax for 2016 would be about £120 million. On a constant currency basis, the consensus had been for £98.3 million.

Brokers leapt into action after the update, with Canaccord Genuity raising its target price for the stock from 410p to 425p and boosting its full-year earnings forecast for the coming year by approximately 3 per cent. N+1 Singer upgraded its rating from “hold” to “buy”, after JP Morgan Chase had raised its target price from 285p to 368p on Thursday. Breaking above 400p for the first time since it floated in 1971, Synthomer closed at 424¼p, up 46¾p.

On the FTSE 100, meanwhile, Smurfit Kappa Group was leading the way after outlining plans to raise the price of recycled containerboard, which is used to make cardboard boxes, by €60 a tonne. Shares in the packaging products company rose by 92p, to £21.81.

Whitbread, owner of Costa Coffee and Premier Inn, gained 49p to close at £41.20. In the early hours, Barclays had raised its target price from £33.40 to £41.50 and upgraded the group from “underweight” to “equal weight”.

As investors awaited Monday’s trading statement, Paddy Power Betfair inched up almost 1 per cent, or 85p, to £86.75.

At the other end of the big board, AstraZeneca was in the red. Its shares fell 150p to £43.18½p after Bristol-Myers Squibb, a rival, said that it would not seek accelerated approval to combine two immunotherapy drugs to treat lung cancer. Analysts at Bernstein suggested that the announcement could raise concerns about combinations of so-called CTLA4 drugs, which are at the centre of AstraZeneca’s immuno-oncology strategy.

A string of broker downgrades sent Royal Mail shares south. It closed at 414p, down 8½p. Analysts responded coolly to Thursday’s trading update, within which it had reported that UK sales fell 2 per cent in the nine months to Christmas Day. Morgan Stanley led the way, reducing its target price from 425p to 395p. Jefferies followed suit, citing deteriorating letter trends and uncertainty over pension reforms, cutting from 390p to 360p. Credit Suisse piled in shortly after the London market opened, lowering its target from 559p to 481p. Consensus predictions for earnings per share are at present “at least 10 per cent too high”, Jefferies warned.

Royal Mail shares soared when they first floated at 330p in October 2013, reaching a high of 615p the following January. They are moving ever closer towards their lowest point since the aftermath of the IPO, 390p, in December 2014.

Retail stocks dominated the fallers. Marks & Spencer, J Sainsbury, Next, Tesco and Associated British Foods, the owner of Primark, were all down between 1.7 per cent and 2.4 per cent. Exane BNP Paribas cut its target price for Tesco from 200p to 175p and downgraded its rating for J Sainsbury to “neutral”.

The FTSE 100 closed ten points, or 0.14 per cent, down at 7,198.44, with trading ceasing just as Donald Trump was sworn in as the 45th US president. Despite the rise of Synthomer, the mid-caps also had a broadly flat day. The FTSE 250 closed down 72.88 points, or 0.4 per cent, at 18,150.84.

The index was held back by the AA. Shares in the motoring group stalled after Liberum cut its target price from 375p to 340p, citing low earnings and higher debt. The broker also shaved 3 per cent off its 2018 earning estimate and the stock fell 17p to 254p. Pets At Home continued to struggle after reporting on Thursday that subdued trading in merchandise had held it back in the third quarter. Stifel cut its target price from 255p to 240p. The shares sank by 7¾p to 205¼p. Debenhams fell, too, the retaiuler’s shares skidding 2.8 per cent, or 1½p, to 53¼p.

At the other end of the mid-caps, Amec Foster Wheeler continued to rise after Société Générale upgraded it from “hold” to “buy” and raised the target price from 500p to 530p. The one-time market darling gained 22p to close at 475p, still off the 585½p precipice it fell from in October.

Bonmarché Holdings was defying its listed retail rivals despite reporting a tough Christmas. The fashion seller’s shares increased by 3½p, or 4.4 per cent, to 82½p, after executives said that they expected to meet full-year profit targets.

Wall Street report
Donald Trump’s first speech as president was predictably bullish, but that didn’t prevent a midday wobble on Wall Street. By the close, though, the Dow Jones industrial average had recovered its poise and was 94.85 points up at 19,827.25.

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