Market Report: Investors ditch Afren over Lion sale

The price that African oil explorer Afren got for its Lion Gas plant failed to keep investors happy and they headed for the exit yesterday.

The mid-cap index-listed oil specialist sold off its Ivory Coast CI-11 block and Lion Gas plant for $26.5m (£17m), but analysts said the City was left disgruntled at the price.

Stephane Foucaud, an analyst at FirstEnergy, said the price was “a fraction of what it was purchased for in late 2008 and what the carry value was at $220m.

“It is almost $200m less than what we were expecting and we are usually on the low side of the consensus. For a £1.6bn market cap, this is quite material”.

Afren did report good production numbers but also revealed a 16 per cent fall in its first-half pre-tax profits to $260m (£167m).

The City reacted by flogging the company’s shares and they were the second-worst faller on the mid-tier table during the afternoon session.

However, they recovered some of their fall and closed the day down just 0.3p to 145.6p.

For the traders still left at their desks yesterday ahead of the long bank holiday weekend, the question was: will the benchmark FTSE 100 index suffer further declines or will blue-chips rock back onto the front foot after a bumpy week?

Brokers described Thursday’s buoyant market as fuelled by “bullish boisterousness” as the index advanced on better-than-expected manufacturing data from Germany and China.

The UK itself got a boost yesterday by the upward revision to second-quarter GDP from 0.6 per cent to 0.7 per cent and the FTSE 100 managed a 45.23 point gain to 6,492.1, but still well short of the all-time highs it was testing a few months back.

The benchmark index is below where it finished a week ago and Mike van Dulken, head of research at Accendo Markets, said: “There is likely to be fatigue at the end of a week that was focused on Fed minutes and interpretation.

“The failure to get back above 6,460 decisively was a concern, which precludes us from assuming the rebound is genuine and the corrective phase complete.”

Miners were in favour for a second day as good news from China means appetite for metal diggers.

Antofagasta edged up 7p to 915p.

Nick Hatch, analyst at Westhouse Securities, retained his buy rating and said :“It is a blue-chip mining investment and for now we maintain our 980p target price ahead of its half year results next week.”

Mexican precious metals miner Fresnillo was 8p better at 1,223p.

Top of the leaderboard was chemical group Croda International after a buy recommendation from analysts at Deutsche Bank. They set a price target of 2,850p and it advanced 110p to 2,677p.

Retailers also won new fans and supermarkets group Wm Morrison was up 6.6p to 292.8p ahead of the Kantar UK grocery market figure for the four weeks to 18 August, which are due out on Wednesday.

Marks & Spencer ticked up 12.3p to 471.6p and Sainsbury’s collected 9.9p to 398.2p.

Aim-listed Clean Air Power soared 3p to 12.25p on news of two new investors, one of them Roman Abramovich’s Ervington Investments. The investment came as part of a £5m placing.

DDD, which specialises in 3D technology, warned that it expects first-half sales to be about $2.4m, down from last year’s $4m. It blamed the fall on a tumble in the demand for its conversion software.

The group has produced a 50.5 per cent drop since the start of the year, and has been hit by the declining global PC market and it was reduced by 3.13p to 10.4p.

Construction and property adviser Sweett has merged its Thailand business with Bangkok-based quantity-surveying business Boulter Stewart but it was static at 36.5p.

Oil explorer Rockhopper Exploration announced it welcomed The Falkland Islands government statement yesterday that said it is confident of a “mutually acceptable” outcome over its tax liability.

Rockhopper’s shares tumbled on Thursday following its results that were hit by a $122m tax bill for operating in the Falkland Islands.

Rockhopper, which shares its name with the rockhopper penguins of the Falkland Islands, is in ongoing discussion with the government over the total amount of tax to be paid. The company’s shares dipped 2p to 118p.

Buy

Xcite Energy

Snap up shares in Xcite Energy, Liberum Capital advises. The broker thinks its Bentley oilfield is on cusp of development and “discussions with potential farm-out partners and lending banks are ongoing”. They rate it a buy with a 340p price target for shares that are 104.5p.

Sell

CPP Group

Flog shares in CPP Group, JPMorgan insists. The broker acknowledges that the credit card insurance and security services group has managed to refinance and started to restructure and reduce costs. The analysts admit “progress has been made” but significant “operational and financial challenges remain to be overcome” so they rate it a sell for the shares that are 11.75p.

Hold

Centrica

Hang on to shares in Centrica, Citi suggests. The broker doesn’t like the energy sector but thinks British Gas owner Centrica will “continue to outperform on a relative basis due to its strong balance sheet”. It remains “neutral” on the stock and gives it a 390p price target for shares that are at the same level.