Market Report: Waste business sees City dump Pennon 

Investors were putting shares in Pennon out with the rubbish yesterday, as Credit Suisse decided to dump the water and waste specialist.

Credit Suisse analysts said the big concern is its struggling Viridor waste-management business which could be hit by pricing pressure as competition increases.

Credit Suisse downgraded it to underperform and said the supply of energy from waste is increasing, while demand is falling, leaving Viridor looking weak. The Credit Suisse team gave Pennon a 610p price target. It was ditched by the City and lost 27p to 699.5p – taking the wooden spoon on the mid-cap index. Previously, some traders had rumoured French services company Veolia could be interested in Viridor but others now think that this is unlikely.

Fellow utilities stocks were also out of favour and United Utilities was 3.5p weaker at 680.5p while Severn Trent trickled down 3p to 1,733p. Also in the water sector yesterday, regulator Ofwat came out against Thames Water’s plan to try to hike customer water bills by almost £30 next year.

The wider market was going nowhere and the FTSE 100 slipped back 5.18 points to 6,583.8.

David Madden, market analyst at spreadbetter IG, said: “Traders find themselves under less pressure now the Syrian situation has cooled down. An immediate strike on Syria appears to be off the table since President Assad has agreed to hand over chemical weapons, and this has brought stability to the markets.”

But traders may already be focusing on what is to come out of the US next week. Mike van Dulken, head of research at Accendo Markets, said: “Uncertainty dominates into the weekend before the Fed’s update next Wednesday and likely announcement of tapering. The Fed takes centre stage in investors’ minds for now.”

Mobile phone giant Vodafone has secured enough shares in Germany’s Kabel Deutschland for its €7.7bn (£6.4bn) offer to succeed and iots shares ticked up 1.9p to 212p.

Taiwan’s MediaTek has picked out its favourite supplier and the result was good news for shareImagination Technologies shareholders. Imagination had been up against larger rival and fellow smartphone microchip designer Arm Holdings to win MediaTek’s heart.

However, it emerged yesterday that the latter has signed an extended licence agreement with Imagination for its graphic chips and it certainly seem happy. MediaTek’s chief marketing officer, Johan Lodenius, said: “We are pleased with this multi-year agreement which will deliver the next wave of success for both companies across key segments.”

The win sent Imagination up 10 per cent as MediaTek makes up around 15 per cent of its total royalty revenue.

Liberum Capital’s scribblers explained: “Fears that Arm was gaining share at MediaTek was a drag on Imagination’s share price of late.

“This licensing agreement may signal that Imagination is going to hold onto its high share at this very important licensee.”

It also comes after a run of good news for Imagination including the announcement this week that Apple’s new phones are likely to use Imagination’s know-how, while US wireless and broadband group Broadcom’s purchase of Imagination customer Renesas LTE could give the company a foothold at the US group.

Imagination developed a 32.3p – or 10.5 per cent – lead to 339.7p and it took the top spot on the mid-tier table. Arm Holdings was weaker after the news and finished the day down 14.5p to 972p

Industrial conveyor belt maker Fenner travelled up 20.1p to 407.4p after analysts at UBS rated it a buy and said it has structural growth still to come after a positive set of results earlier this week.

They gave it a 460p price target and said it is the lowest rated of the UK engineers because the market is too focused on the plight of “European mining” but Fenner has growth potential in other markets.

Oil and gas engineering group Kentz said it has successfully fought off two suitors in a bid to keep its independence. On Thursday it revealed Amec had walked away from upping its £690m offer and yesterday it confirmed Stuttgart-based M+W Group had also declined to increase its bid. Kentz slipped 7p to 492p.

On Aim, engineering support services outfit Redhall Group issued a profit warning and said it expects second-half trading to be below management expectations as restructuring costs have weighed on the group, which was 12.5p weaker at 43.5p.

Clinical software supplier EMIS has bought healthcare IT specialist Ascribe Group for £57.5m and placed 4,400,000 new shares at 615p, raising £27.1m to fund the acquisition. It finished the day down 28p to 635p.

Buy

Halfords

Peel Hunt has given Halfords the thumbs up, describing it as “a turnaround story with momentum”. The broker has raised its price target for the group — presently 406p — from 400p to 475p and believes that the new management team at the bike and car parts retailer “can deliver a clear improvement in retail standards relatively quickly”.

Sell

Debenhams

But it’s not all beer and skittles in the world of retail and Cantor Fitzgerald recommends selling Debenhams. The broker says it expects the “subdued consumer environment” to continue, which might stop the retailer returning to growth soon. It has a 70p target for the shares, which ended at 102p.

Hold

Bellzone Mining

Keep a firm grip on Bellzone, Canaccord Genuity advises. The broker thinks the Africa-based iron ore miner’s recent update shows that “management is getting close to a viable first-stage development plan” for its large Kalia deposit in Guinea. It has a 4.2p target on the shares, which closed at 4.24p.