Johnson Matthey is hitting top gear
CONTINUING strength in the market for trucks in North america, and signs of a pickup in europe could be the key to reversing fortunes at catalytic convertor maker Johnson Matthey.
Goldman Sachs thinks the recent underperformance seen in Johnson Matthey shares since last month’s disappointing first-quarter results has created ‘an attractive entry point’ for the stock leading it to upgrade its rating to a conviction buy.
In a note to clients, the broker said continuing upside surprises in european automotive production data should be a driver for earnings upgrades for Johnson Matthey, which will report full-year results in November. Goldman said a reiteration or slight upgrade of guidance from Johnson Matthey would then provide some reassurance on the order backlog at i ts emission Control Technologies unit.
The implementation of tougher diesel emissions legislation in China and a further tightening of exhaust emission standards in europe should also benefit the FTSe 100 firm, the broker added.
Goldman noted that Johnson Matthey shares are trading below their 10-year historical average despite an acceleration in underlying growth, and it retained a price target of 3980p on the blue chip stock, which was up 77p to 3091p.
The gain came as the Footsie pushed back the 6,700 level for the first time in august, buoyed by hopes Uk interest rates are not now likely to rise until next year, after this week’s dovish Bank of england inflation report.
a slight upwards revision in annualised Uk GDP growth for the second quarter failed to dent that expectation.
The FTSe 100 index closed 3 points higher at 6689.08, giving back earlier gains following news of escalating tensions between Russia and Ukraine.
Strength in the heavyweight mining sector provided the main prop for the Footsie as investors’ risk appetite returned with an easing in geopolitical tensions. Rio Tinto fell 18.5p to 3405p and commodities trader Glencore was down 7.75p at 357.92p.
BHP Billiton was a big blue chip riser on its plans to spin off some of its assets in a demerger, gaining 10.5p at 2050p. The global miner is due to publish its full year results on Tuesday.
But among the blue chip fallers was medical devices maker Smith & Nephew, which dropped 15p to 1018 after broker Morgan Stanley downgraded its rating to equalweight from overweight following a recent strong run in the stock. S&N’s share price has risen by over 20pc since the start of 2014, which Morgan Stanley says was driven partly by speculation surrounding an abortive takeover by US peer Stryker.
Morgan Stanley said that even if Stryker returned with a bid in November, the deal ‘remains uncertain’ and the stock ‘ could start to lose its M&a premium of around 10pc’ in the near term.
On the second line, Carillion rose nearly moere than 4pc or 13.1p to 333.1p with investors concerned it could turn hostile in its attempts to takeover Balfour Beatty after the engineering and construction group again rejected its rival’s proposal. But mid cap stocks overall paced the blue chip advance, with the FTSe 250 index closing 7.75 points down at 15667.81.
among the small caps, Sunrise Resources soared 13.33pc higher, up 0.05p to 42p after the minerals explorer said it had got further positive results from the County line Diatomite Project in Nevada, supporting a large tonnage potential at the site.
The fossilised remains of aquatic algae composed entirely of silica, Diatomite has a wide variety of uses including in dental fillings, adhesives, oil drilling compounds, and paper.
away from the resources sector, Aqua Bounty Technologies slipped 0.5p to 17.5p after the biotechnology firm – which is developing a genetically modified atlantic salmon – revealed a widening in its first-half net losses on the back of costs related to the commercialisation of its fish product. The company expects the salmon products to get US Food & Drug administration approval before the end of the year.
With the Premier league season kicking off this weekend, web-based Tv channel TipTV, is set to go mainstream, broadcasting its sports betting show on Sky on Saturday mornings.
TipTv, launched by former hedge fund manager Nick ‘Moose’ Batsford and financial PR legend David Bick, reckons its pundits have delivered a 23pc return on investments in the six months since it started with its mix of City and sports shows in March.
Shares in AIM-listed Zanaga Iron Ore jumped nearly 9pc on news it had been granted a 25-year mining licence for an eponymous project in the Republic of the Congo. A joint venture with commodities firm Glencore, it will be developed in two stages and is one of the largest mining projects planned in Africa. The cost of the first stage alone is estimated at between $2.5bn-$3bn. Shares were up 1.5p to 18.75p.
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