Market Report: Invensys gains thanks to dividend and bid chatter

Toby Green
Tuesday 15 February 2011 01:00 GMT
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As hopes were raised over dividend payments and speculation swirled that it could be a takeover target, Invensys found itself in favour with investors yesterday.

Reaching a peak of 360.6p near the start of trading, the engineering group eventually closed at 352.5p – a 11.6p gain – as Morgan Stanley kept its "overweight" rating on the group.

Reiterating its price target of 350p, the broker said it believed the company's full-year results – expected in May – could see it announce the start of a formal dividend policy. Invensys made its first dividend payment for six years in 2009, following a turnaround of the group's fortunes.

However, traders said a bigger boost behind the stock was vague chatter that it could receive an approach from Siemens following the German company saying it plans to make multibillion euro purchases.

Rumours of Siemens eyeing up Invensys have been around regularly in recent months, but market voices said there was extra impetus yesterday, given the fact the engineering conglomerate has now signalled its intention to make acquisitions.

Siemens' comments also led it to be linked with a bid for Weir, which was lifted 68p to 1,763p. Another catalyst for the pump and valve maker was UBS, which said it continues "to have confidence in [the group's] structural growth and earnings story".

Overall, the FTSE 100 just failed to keep its head above water – edging down 2.81 points to 6,060.09 – while the FTSE 250 made 36.17 to finish at 11,833.94.

A promise that it would return at least $1.7bn to its shareholders following the sale of its well support division to General Electric helped Wood Group put on 79.5p to 652p. The energy services provider was praised by analysts for managing to get $2.8bn for the unit, while they also said its chances of receiving a takeover approach itself had now increased.

Collins Stewart described the deal as "strategically sound, concentrating Wood on its core engineering and operations support businesses", adding that, as a result, "we would view [it] as a more attractive target for Amec".

Many of the groups in the banking sector found themselves down following a warning from Moody's Investors Service that it is "conducting a re-assessment of government support in its debt ratings of banks, which could ultimately lead to the downgrade of bank subordinated debt across several countries".

Lloyds Banking Group and HSBC were knocked back 1.1p to 65.7p and 6.1p to 707.9p respectively, while Barclays was 0.3p weaker at 310.8p ahead of its full-year results today.

However, Royal Bank of Scotland shifted up 0.3p to 44.3p after Exane BNP Paribas' Ian Gordon stayed positive on the bank, saying he expects "further outperformance from here".

International Consolidated Airlines failed to take off, sliding 4p to 245p as its bad run continued. The result of the merger between British Airways and Iberia has now lost nearly 15 per cent since it started trading last month under its new title and yesterday it was hit by UBS expressing its concern over increasing fuel prices.

Not for the first time in 2011, Arm Holdings took pole position on the top-tier index, with a climb of 40p to 651p.

The catalyst behind the latest surge was support from Goldman Sachs, which upped its price target to 800p, as well as Morgan Stanley's comments on tablet devices. The broker said it expected "55 million ... shipments in 2011 (up from 16 million in 2010), 85 million in 2012, and 102 million by 2013".

Data from China showing imports had risen over 50 per cent helped the miners as City Index's Joshua Raymond pointed out that "any sort of evidence that reaffirms the Chinese growth story and strong metal demand has typically seen a bullish reaction from investors". Among the sector's winners as a result were Xstrata, up 30p to 1,505.5p, and Antofagasta, up 27p to 1,486p.

Exillon Energy rose to the top of the mid-tier index with a huge jump forwards of over 15 per cent, moving 51.1p to 391.6p. The oil producer released the results of an independent study that increased the estimation of its reserves by nearly 75 per cent, up to 239m barrels.

The takeover suitability of CSR – 4.9p higher at 447p – was given another push by UBS's Gareth Jenkins, who said it remains "a potential acquisition target given its leadership in Bluetooth and the growing importance of connectivity in mobile devices".

Meanwhile, Fidessa released its final results, but despite posting a 10 per cent rise in revenue, the group still slumped 20p to 1,680p.

It may supply fire engines for the emergency services, but on the Alternative Investment Market it was Assetco which need rescuing after losing nearly 24 per cent, plummeting 11p to 35p as it revealed the end of its takeover talks.

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