HEAVY HEDGE fund selling left Dixons rooted to the top of the FTSE 100’s fallers list yesterday. According to market gossip a downgrade by a major broker is on the cards before the end of the weekand a select number of hedge funds were looking to make a quick buck by shorting the stock.
The electrical retailer is expected to issue a short trading statement next week and commence a series of briefings with sector analysts. There was heavy trading in Dixons stock as over 50 million shares changed hands.
Talk of a downgrade aside, some analysts offered a simpler explanation for the drop in Dixons’ share price. They pointed to a disappointing British Retail Consortium sales survey for October. The BRC’s monthly sales monitor showed that the value of sales rose just 0.8 per cent on a like-for-like basis last month, compared with a 2.8 per cent rise in September. Analysts were particularly dissatisfied with the performance of big-ticked retailers, particularly those selling electricals. Hence Dixons’ fall 5p lower at 137p.
Elsewhere in the sector, Kesa Electricals surprisingly rose 2.75p to 242.25p, while furniture retailers were under pressure. Courts fell 6.5p to 280p, DFS gave up to 4.5p to 375.5p and MFI Furniture retreated 3.25p to 149.75p.
In the telecom sector, Cable & Wireless lost 0.75p to 128.25p as Nomura urged its clients to exit the stock ahead of today’s interim figures from the group. Nomura warned that the results could disappoint the market due to a lack of detail on C&W’s planned withdrawal from the US.
“We do not expect management to stand up and provide a wealth of detail on their expectations for the costs of exiting the US, given that we suspect that negotiations are continuing”, Nomura told investors. It downgraded C&W from a “neutral”rating to “sell”. Mm02 dropped 0.5p to 65.75p as Dresdner Kleinwort Wasserstein tipped that the group’s upcoming interim results will show solid top-line growth and improving margins but advised investors to switch into rival mobile phone operator Vodafone, up 1p to 124.25p.
LogicaCMG dropped 12p to 288p after ABN Amro, the group’s house broker, downgraded its rating to “hold” from “add” on valuation. The Dutch broker believes that Logica’s current share price adequately reflects any possible upgrades in its earnings, thanks to the modest revival currently going on in IT spending. “We see the shares performing in a lacklustre way and at best holding current levels”, said ABN.
Paladin Resources dropped 3.75p to 88.25p as Investec Securities warned investors they are too much from the company in the short term, especially from the group’s Njord field in Norway. As a result, Investec slashed its 2004 earnings forecast by a hefty 26 per cent. “Our previous expectations for 2004 production now appear to have been rather over-optimistic. The pace at which we had expected drilling to be implemented at the key fields in Norway now appears to be considerably slower than previously hoped,” the broker warned.
Rights issue rumours were back in a big way at Corus, 1.75p higher to 26p. The latest talk suggested that the troubled steel maker is about to launch a one-for-one rescue rights-issue at 15p. Market professionals are certain that any rights issue at Corus will be fully underwritten by its broker Cazenove. Corus responded to the speculation with the usual “we don’t comment on market rumours” retort.
Philippe Varin, Corus’ new chief executive, is known to be looking to raise a substantial amount of cash with which to fund a shake-up at the loss-making steel group.
Alizyme rose 10.5p to 181p on talk of a 222p-a-share bid for the company. The group is certainly a prime target for a larger player. It has three products ready to go into Phase III trials, a rarity in the sector. Burberry gave up 1p to 397p amid whispers that GUS, its major shareholder, is about to place a large chunk of its 77 per cent stake. Market professionals reckon GUS has been itching to cash in on its Burberry holding for some time and that a placing could come sooner rather than later.
Rumours that the bus group Tellings Golden Miller will soon unveil an earnings enhancing acquisition pushed its shares 10p higher to 160p. Rotork rose 9p on 381.5p thanks to talk of an upturn in orders at the group’s US division. Southern African Resources jumped 3p to 10.75p amid heavy demand for the stock from institutional investors. The company, chaired by former England cricketer Phil Edmonds, has recently completed a wellreceived road show of institutions in New York.
Investors should keep an eye on African Gold, up 0.5p to 2.75p. Word has it the group will soon announce a change of direction from gold mining in the troubled African country of Zimbabwe. Earlier this year John Teeling, the group’s chairman, complained that gold production in Zimbabwe barely covered costs. An announcement may well come before the end of this week and is likely to see a number of new investors backing the company.
