Market Report: ENRC hits the top on stakebuilding

All eyes were on ENRC yesterday as the City speculated on the motive behind Russian billionaire Suleyman Kerimov’s stakebuilding in the troubled Kazakh miner. ENRC, which is the subject of a Serious Fraud Office investigation into allegations of fraud, bribery and corruption, has seen its shares fall more than 17 per cent since the claims emerged.

The three founders of the miner, Alexander Machkevitch, Patokh Chodiev and Alijan Ibragimov, have been trying to raise cash to take the digger private with fellow shareholder, the Kazakh government. The group owns 54 per cent of the company and has until 17 May to make a bid.

But Mr Kerimov, who has a large stake in London-listed Polyus Gold International and is ranked as Russia’s 20th-richest person by Forbes, has spent this week stakebuilding.

Yesterday it emerged his shareholding reached 3.05 per cent. One theory doing the rounds was Mr Kerimov is working with the founders to help buy up stock that had been out on loan and will work with them if they make their bid this month.

The market reacted well to the speculation. ENRC jumped 30.3p to 292.7p and took the top spot on the blue-chip index.

ENRC was riding a wave of money piling in to equities across the index. Good news on United States jobs data pushed up the stock markets with the S&P 500 climbing beyond 1,600 and the Dow Jones reaching above 15,000, both for the first time. The FTSE 100 closed the day near to its five-year high. It added 60.75 points to 6,521.46, its highest since 14 March this year.

But the strong sentiment for equities failed to help Royal Bank of Scotland. The taxpayer-owned bank reported an £826m pre-tax profit for the first three months of 2013, the first quarterly profit since the third quarter of 2011. But it was below expectations and the shares crashed 17.5p to 289.8p, taking the wooden spoon.

Reports that the Government is abandoning plans to introduce plain packaging for tobacco products helped cigarette makers’ shares. Yesterday analyst at Panmure Gordon said the news “should provide a fillip” for Imperial Tobacco, led by Alison Cooper, and rated it a buy at 2,650p. But it failed to light up just yet and was 12p worse off at 2,358p.

Over on the mid-cap index, the hedge fund specialist Man Group’s plan to repurchase all its outstanding debt was welcomed by shareholders and it advanced 13.7p to 120p. But its first-quarter results were not appetising reading; it said assets under management dropped to $54.8bn (£35.2bn) from $57bn at the start of the year.

The City’s best-known activist investor increased his stake in private-equity group 3i, leaving the Square Mile guessing his next move. Edward Bramson’s turnaround specialist Sherborne Investors revealed it owns 4.9 per cent of the group, a £127m stake, a position that has been growing since it was revealed in January.

Sherborne is well known for building up stakes in underperforming companies before calling for a shake-up in management. But analysts have this time questioned how Mr Bramson will proceed.

3i chief executive Simon Borrows joined a year ago, and has started a successful turnaround of the group, including cost-cutting. The shares have soared more than 90 per cent since then. Liberum Capital’s Rob Jones said that even if Sherborne invested all its capability, it would still only own around 8 per cent.

He added: “We believe they are more likely to sell down their stake and take profits rather than continue to…increase their exposure.”

The shares ticked up 1.3p to 334.4p.

Electronic components maker Laird was hit by falling revenue from its largest customer, thought to be Apple. It makes components for devices including smartphones, and said first-quarter revenue slipped back by 2 per cent. Its shares tumbled 9.2p to 207p.

Another Apple supplier, microchip designer Imagination Technologies, on Thursday issued a profit warning.

But analysts at Morgan Stanley said buy the shares as they think there is still an “upside to royalty revenues”. The shares dipped 0.5p to 314.9p.

The private-equity bidder in talks to buy AIM-listed celebrity jeweller Theo Fennell has been given a sixth extension to the “put up or shut up” deadline.

The talks have dragged on since September and EME Capital now has until the end of May to make a bid. The shares were static at 9.25p.

Buy

Direct Line

Pile into Direct Line, is the call from Numis Securities. After the insurer’s figures yesterday, Numis’s Nick Johnson says the group “appears firmly on track to deliver its performance targets”. Although he warns that he expects “current uncertainties with motor insurance to be a drag on near-term share price performance”, his target of 265p is a long way north of Direct Line’s current share price of around 201.6p.

Sell

Morrisons

Get rid of shares in Morrisons, is the advice of Espirito Santo. The supermarket is unveiling its first-quarter figures on Thursday, and while the broker’s analyst Caroline Gulliver is expecting an “improving trend...as the year progresses”, she adds that she expects new finance director Trevor Stain “to lower margin expectations, in due course”. She has a price target of 230p for shares which are currently around 293p.

Hold

BSkyB

Keep shares in BSkyB, says Investec. The satellite broadcaster announced numbers for the first three months of the year on Thursday, and the broker is sticking with its hold recommendation “ahead of a ‘noisy summer’” thanks to rival BT’s expansion of its sports programming. However, it has raised its price target to 880p. BSkyB currently trades at roughly 860p.