FTSE 250 movers: Galliford ghosts higher, AA and Melrose whacked
Two construction groups linked to Carillion led the risers on the FTSE 250 on Monday, Galliford Try and Kier Group.
There was little in the way of fresh news for Galliford Try, save a downgrade to 'hold' from Canaccord Genuity and the announcement late last week that the company had reached financial close to build the new City of Wolverhampton train station, which is a relatively small £19m contract.
Analysts said Galliford's results were overshadowed by the "somewhat surprising" news that the group intended to raise equity of £150m, for which the precise terms are awaited. "For now we downgrade to a Hold and await further details on the rights issue. Assuming a successful equity raise, the balance sheet would strengthen and the investment case is then back to the long-term growth objectives, particularly in respect of its housing businesses and ensuring that legacy construction contracts are worked through with new contracts performing better as risk is better managed."
On Kier, Kier and Skanska were said to be the final two contractors battling to replace Carillion on the Midland Metropolitan Hospital contract, Construction News reported.
Cairn Energy was boosted as Morgan Stanley hiked its rating to 'overweight' with a 300p target. Analysts see more potential in its SNE offshore Senegal project than the market seems to be attributing. A 5% stake in Vedanta Resources could be worth nothing or up to 100p per share depending on the result of arbitration on a tax claim made by the Indian government.
“Assuming a $65 a barrel real Brent price, the SNE project in Senegal could be worth around 160p or 80% of the share price. We believe the market is only rewarding for 60 per cent of that value. Cairn has been making steady progress on SNE and a final investment decision is now less than a year away in end-2018.”
AA was the biggest faller as the roadside assistance group becomes the second-most shorted stock in the City as hedge funds see potential for the shares to add to their 53% fall since over the start of the year. Last month, new chief executive Simon Breakwell, ex of Expedia and Uber, said he will fuel up investment to support a significant move into 'connected car' technology and insurance, though this will result in profits falling as much as 15% in the current financial year.
Hikma Pharmaceuticals and Vectura Group also took a hit as the US Food & Drug Administration said their generic version of GSK's Advair Diskus respiratory medicine would need more clinical data. Generic drug specialist Hikma said it had anticipated this had already put in place plans to start enrolling patients in the trial "in the coming weeks" and anticipates being able to submit the data to the FDA "as early as possible in 2019".
Panmure Gordon said the "certainty given" from the announcement was "positive for Vectura, removing debate over timing". Analysts added that "in our view the the current share price does not contain any value for the drug or others in the pipeline, including only the currently marketed products, making the stock good value at the current price".
Insulation expert SIG was down as Canaccord cut its estimates, "detecting a bit more caution" about the outlook, and lowered its target price down to 165p from 180p, but still maintained a 'hold' rating.
Melrose upped its offer engineer GKN but investors shrugged it off, sending shares in the turnaround specialist down almost 5%.
Shares in satellite communications specialist Inmarsat were down despite an upgrade from Numis and a 'buy' from Deutsche Bank. After Friday's fourth-quarter results, which were ahead of expectations as maritime returned to growth but saw the dividend cut or 'rebased', JP Morgan slashed its target price to 580p from 690p. "Mid-term commentary suggests a need to rebase government forecasts, but nevertheless implies management are confident in a sustainable growth outlook."
Jefferies changed its stance on challenger banks CYBG and Virgin Money on Monday, upgrading the former as it downgraded the latter. Virgin Money was cut to 'hold' from 'buy', saying the shares will remain a "value trap" until the market sees proof of concept of the digital strategy, which is likely more than a year away.
Galliford Try (GFRD) 957.00p 8.75%
Kier Group (KIE) 1,073.00p 4.07%
Cairn Energy (CNE) 204.20p 3.97%
Equiniti Group (EQN) 321.50p 3.88%
Acacia Mining (ACA) 138.15p 3.33%
Barr (A.G.) (BAG) 661.00p 3.28%
FDM Group (Holdings) (FDM) 1,020.00p 3.24%
Greene King (GNK) 503.00p 3.12%
Assura (AGR) 59.85p 2.84%
TalkTalk Telecom Group (TALK) 112.20p 2.28%
FTSE 250 - Fallers
AA (AA.) 79.80p -4.11%
SIG (SHI) 130.90p -3.96%
Hochschild Mining (HOC) 204.10p -3.54%
Inmarsat (ISAT) 418.40p -3.30%
Vectura Group (VEC) 78.85p -3.07%
Melrose Industries (MRO) 217.80p -3.07%
Mitie Group (MTO) 161.00p -2.78%
Dignity (DTY) 888.00p -2.74%
Polymetal International (POLY) 765.60p -2.47%
Virgin Money Holdings (UK) (VM.) 268.10p -2.37%