AA rallies as brokers give thumbs up to a dividend
ROADSIDE assistance group AA may be heading towards a huge legal battle over the dismissal of its former boss, but one broker thinks it is far from a write-off.
Analysts at Liberum said AA’s shares reacted ‘very negatively’ earlier this month when the firm sacked executive chairman Bob Mackenzie and downgraded its full year performance forecast.
The broker remains confident that AA will still be able to pay its full year dividend without having to raise cash, and gave it a ‘buy’ rating. Mackenzie, who many had hoped would be instrumental to AA’s turnaround following a period of weakness, was rumoured to have got the boot following an altercation with a colleague at a hotel bar.
But last week his family claimed he in fact resigned and has since checked into hospital with mental health problems, leading AA to brace for a legal battle over his potential £150m bonus payout.
Despite other big broking names such as Credit Suisse downgrad- ing AA on the news, Liberum said the stock looks ‘very cheap’, with Mackenzie’s departure accelerating existing plans to shake up senior management. Shares rose 0.6pc, or 1.1p, to 188.8p.
After slipping to a three-month low at the end of last week, the
FTSE 100 enjoyed a day in the black yesterday, advancing 0.60pc, or 43.93 points, to 7353.89.
The index was led by financial stocks and mining companies, which benefited as investors moved away from defensive investments as fears over a potential war between North Korea and the US began to decline. Meanwhile, gold prices fell 0.32pc to $1283.66 an ounce, taking the shine off a recent rally in the price of the traditional safe-haven asset.
As holiday firm Tui flew 4.8pc, or 59p, to 1290p following a double upgrade by Credit Suisse, credit checker Experian and business support giant G4S languished following a battering by analysts at Morgan Stanley.
Experian fell 1.5pc, or 22p, to 1495p after the broker cut it to ‘equal-weight’ from ‘overweight’ and reduced its target price to 1550p from 1680p. Analysts said the firm could be hit by increased regulation following a rapid expansion in credit since 2013, and said UK and US banks are becoming less keen on issuing unsecured debt and auto finance.
Meanwhile, Morgan Stanley said that although stretched public sector budgets could help G4S grow in the medium term, it faces growing competition in the Middle East, India, and the UK.
Analysts downgraded the stock to ‘equal-weight’ from ‘overweight’ leading shares to fall 1.1pc, or 3.4p, to 296p. LightwaveRF rose to its highest value in more than two years (up 19.2pc, or 4.5p, to 28p) after the smarthome device maker revealed that its next product range will be on sale in Apple stores across the UK and the UAE. Its Apple HomeKit-enabled range will be launched on October 3, enabling customers to control their home’s lighting, heating and power using products such as the iPhone and iPad. Financial market data provider
Arcontech slipped after telling investors that it is trying to cut down the time it takes to sell its services to customers.
Despite reporting a jump in revenue and profits for the year ended June 30, the firm said the length of its sale cycle is unpredictable and often takes too long.
‘The length of the sales cycle is something that is a constant and the only realistic way to address it is to create more sales opportunities,’ said chief executive Matthew Jeffs. Shares in the business fell 4.6pc, or 3p, to 62.5p.